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The most notable thing to report from yesterday in financial markets was another record close for the S&P 500 (the U.S. equity market), which notched up its 60th high for the year, with the Technology and Energy sectors to the fore. There was help for the oil majors as Brent crude hit levels not seen since June 2015. Supply and demand fundamentals have been on an improving trend recently, but yesterday’s gains were helped by a pipeline disruption in the North Sea.
It is worth noting the volatility in the UK 10-year Gilt yield over the last couple of days. On Friday last week, the yield was as high as 1.33%, and at one stage yesterday it was as low as 1.19% (not very exciting but it is for bond markets!). The spike up in the yield last week seems to have been the result of a positive reception for the latest round of Brexit negotiations (so less chance of a “hard Brexit”, which is deemed to be more negative for the economy); the run back down possibly resulting from the continued lack of unity within the government (so increasing the chances of a disruptive outcome). It is certainly hard to see any drivers other than politics, especially as no other major developed bond market experienced similar volatility.
In Weekly Digest, it is noted that global M&A (Mergers and Acquisitions) activity is not at the euphoric levels one might associate with a market peak. However, there are a couple of notable deals that have been announced today. Dutch real estate company Unibail is potentially making a A$20bn bid for Westfield. And in technology, Atos of France is making a €4.3bn bid for Gemalto, although it is worth noting that the €46 bid is still well below the €63 peak Gemalto’s shares hit in March this year. Also in Westfield’s case, a bid at a 10% premium to the last close, as is rumoured, would fail to get the shares back to the level at which they started the year. So maybe these bids can be described as opportunistic rather than rampantly speculative.