M&A activity propels FTSE higher

The Shell and BG mega merger adds 50 points to the FTSE, pulling it into positive territory regardless of the negative sentiment surrounding the European equity markets.

A Shell logo
Source: Bloomberg

The European Central Bank will be hoping that the increased optimism in financial sentiment in the eurozone will work its way down to the retail consumer, and therefore helping to ease some of the inflationary issues the region has suffered from. Corporate news will no doubt gain the lion’s share of the markets’ attention today, but the underlying issues Greece have in meeting its Thursday debt repayment deadline aren’t far behind as the International Monetary Fund will be less than 100% confident it will receive its €450 million.

The talk around City trading floors is now fully focused on the M&A activity we have seen in the last 48 hours. Yesterday it was FedEx and TNT, today it is Shell and BG Group in a £48 billion deal. Today’s proposed acquisition would create the largest company in the FTSE and the second largest oil and gas company in the world behind Exxon. The confirmed deals have oiled the wheels of the rumour mill, and speculation surrounding Vivendi and Sky is now circulating.

Independently, easyJet might well have been pleased to report passenger numbers up by 7.5% for the month, but when compared to yesterday’s Ryanair announcement, an increase of 28%, it does rather take the shine off them.

The managerial merry-go-round in the FTSE has been busy of late, and Royal Mail has decided to act ahead of any potential issues by increasing Moya Greene’s remuneration which has remained unchanged for the last five years.

Today’s US oil inventory figures, expected an hour after the American markets open, are sure to be closely watched as oil prices have edged higher over the last week. With events such as the Nigerian elections, Iranian nuclear talks and now the mega merger between Shell and BG group, there has been a lot for oil traders to absorb. At 7pm (London time) we will get an opportunity to digest the minutes from the latest Federal Open Market Committee meeting, and these will no doubt enable economists the opportunity to gauge the most recent thinking of the panel and when interest rate rises might start.

Alcoa will kick off the latest round of the US corporate reporting season when it releases its first-quarter figures  after the US markets close. Considering the way the dollar has strengthened over the last three months observers will be keen to see how much of a negative impact this is having on the US corporate arena.

Ahead of the open we expect the Dow Jones to start 33 points higher at 17,908.

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