FTSE struggles despite strong M&A activity

In mid-morning trading, the FTSE 100 has opened the week on a desultory note, although M&A activity in the drinks sector has provided plenty of interest. 

City of London skyline
Source: Bloomberg

The week has opened with modest losses across the board for major indices, but this belies the extent of newsflow in global markets. The big themes of the week will still be Greece and the direction of US monetary policy, but bid activity and management changes are also commanding attention this morning.

Diageo shares have rocketed this morning as the drinks maker’s London-listed shares play catch-up to Friday’s news that the company is a possible target for Brazilian billionaire Jorge Lemann. The industry has been a hot-spot of M&A activity, with smaller brands being picked up by major names looking to boost their appeal in niche products, but this is a deal of a different order of magnitude. Given the amount needed to actually succeed, this bid could either be a crowning glory for Mr Lemann or a moment of extreme hubris. At any rate, it has certainly allowed Diageo to move ahead of its rival SABMiller in performance terms for the year so far.

The departure of Deutsche Bank’s leaders also caused shockwaves, but shares in the bank rallied as investors cheered the chance of a new management direction that might recover much of the ground lost in recent years as the German bank struggled to match the might of Goldman Sachs.

US investors will be hoping Wall Street can reverse the weak start to the month that we saw last week, when indices shed ground on a combination of Greek woes and a rising dollar. Even President Obama has reportedly taken an interest in the direction of the greenback, although these remarks were swiftly denied.

Whatever Mr Obama said, he is merely catching up with the main worry of equity investors over the past year, namely when will the Federal Reserve raise rates? Friday’s jobs report caused some to bring their estimates forward, but we will need more good data to confirm that the weakness of the first quarter was just an aberration.

Ahead of the open, we expect the Dow Jones to start almost unmoved from Friday’s close, at 17,852.

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