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M&A activity boosts markets

Bullish markets help the FTSE 100 trade back above the psychological 7,000 level again. 

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London
Source: Bloomberg

FTSE fails to stay above 7,000

The days of the FTSE having the jitters ahead of a Bank of England interest rate decision are long gone and traders' focus in the early session was based around the struggling commodity markets and the knock on negativity that it was having on the mining sector stocks. With Greece proving to be good for its word and paying back the IMF, equities around Europe were free to charge higher. The FTSE was obviously feeling frisky with all the M&A chat and briefly popped above 7,000 before the vertigo kicked in.  

Equities will see the benefits of the FedEx-TNT and Shell-BG Group deals for some time as board members across European corporate stocks will feel that much braver in embarking on their own M&A activity, and traders will be that much more inclined to speculate on market rumours.

Yesterday saw Sky's shares climb as Vivendi's interest became public knowledge, while today has seen Burberry sit at the top of the FTSE climbers list due to market whispers.

One cloud on the horizon that the markets are choosing to ignore is the looming UK general election. At the moment, IG’s general election binary is giving it an 85% chance of no one party getting a majority but also the most likely outcome at present is the 30% chance of a Labour minority government. With over three weeks to run there is plenty of time for this to change but whomever comes to power might not have the most stable of platforms from which to improve or more worryingly maintain the UK’s current economic recovery. 

Alcoa sees better-than-expected EPS

After the US close Alcoa started the ball rolling on this latest US reporting season, with better-than-expected EPS. Regardless of the board's more optimistic outlook for demand over the rest of 2015, the slightly weaker revenue figures look to have garnered the attention of traders as the early session trading saw shares fall by over 5%. In this instance worries over the damaging effects of the strong dollar look to be unfounded but this will be something that will continue to be scrutinized in the coming weeks.

Intel and Altera shares were both weaker having walked away from talks as neither party was able to agree on an acceptable price. This sudden development has seen some question Intel’s intent as far as UK company ARM Holdings is concerned; speculation that is likely to gain considerably more traction now than it would have only a week ago.

Gold appears to be an opportunity to sell

Just as oil traders were getting to grips with the very real possibility of Iranian oil supplies once again being permitted, a verbal tit for tat fight has broken out between the ostracised nation and the Saudi coalition taking action against Yemen. The short-term consequence of this has been a fresh bout of scepticism triggering a sharp bounce in both Oil - Brent Crude and Oil - US Crude.

Unlike European equities, gold always has the appearance of something labouring under the burden of gravity and any bounce just appears as an opportunity to sell. Considering the sustained period of ultra-low interest rates globally and the uncertainty driven by macro events that have unfolded, gold's report card for the last couple of years would read 'must do better'. 

FOMC leaves no certainty in rate rising

The last Bank of England interest rate decision before a general election was hardly likely to be the time to end a six-year run of rates being held at 0.5%, an opinion the MPC obviously agreed with. Last night’s FOMC statement made one thing abundantly clear and that is that there is no clear consensus on when is the best time to start raising rates within the board.

A week ago currency markets looked to be tentatively questioning whether the strength of the dollar against both the euro and sterling was warranted and the last seven days of selloff have conclusively answered them.   

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