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M&A activity nudges FTSE higher

The FTSE 100 has started the week off on a sound footing, aided by some moves from mining stocks and fresh M&A speculation in the pharmaceutical sector.

GlaxoSmithKline building
Source: Bloomberg

Instant analysis of Ryanair’s first-half figures would suggest that European travellers are a forgiving bunch, and have quickly taken to the new 'friendly cuddly' airline. If that was not enough to get traders scratching their heads, Michael O’Leary’s comments that profits up 152% should not trigger any 'irrational exuberance' saw many choking on their morning coffee.

Once again the pharmaceutical sector is providing plenty for the markets to digest, the flurry of M&A activity shows no sign of diminishing as GlaxoSmithKline has announced it was considering stripping off its consumer healthcare arm. The more cynical on the trading floor are wondering whether this is a realistic move or an excellent attempt to refocus attention away from the less palatable Chinese bribery issues surrounding the company.

Weighing down FTSE sentiment has been Aberdeen Asset Management, any benefits the company has felt by the improving underlying equity markets have been undermined by a reduction in funds under management created by client withdrawals.

The news that US firm Destination Maternity has given up its attempts to acquire Mothercare have seen its shares collapse almost 10% in early trading. Mothercare stated this will now allow them to focus on UK markets again, something that has seen them singularly fail to master over the last five years of the baby boom. 

US earnings reports will be a little thinner today as investors ease themselves into the week, the big hitters such as Pfizer, McGraw Hill, American Express and Twitter all come out on Tuesday. Over 75% of the US corporates that have reported so far have beaten expectations, so it is no surprise that we have seen the equity markets continue to trundle higher.

With today hosting a much thinner corporate calendar and the US services PMI along with June pending home sales, we might see a pause before the pace once again picks up.

Ahead of the open we expect the Dow Jones to start 18 points lower at 16,942. 

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