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Shire jumps on possible offer from Japan's Takeda, markets nervous after tech shakeout - live Shire jumps on possible offer from Japan's Takeda, markets nervous after tech shakeout - live
(35 minutes later)
Here is the full statement from Takeda, which includes more detail of the Japanese company’s thinking:
Takeda believes that a potential transaction with Shire presents an opportunity to advance Takeda’s stated Vision 2025, build on its current strong momentum, and create a truly global, value-based Japanese biopharmaceutical leader. In particular, a transaction with Shire would:
· strengthen Takeda’s core therapeutic areas of oncology, GI and neuroscience
· accelerate Takeda’s vision to be a leader in specialized medicines that are transformative to patients through the addition of Shire’s leading global rare disease franchise
· further enhance Takeda’s robust R&D strategy, concentrating on key therapeutic areas
· reinforce a strong and large-molecule focused late-stage pipeline within Takeda’s core therapeutic areas to complement Takeda’s own pipeline and discovery capabilities
· balance Takeda’s geographic focus to align with the market opportunity in the U.S.
· drive financial value from a strong combined financial profile
Clearly defined strategic and financial objectives are core to Takeda’s disciplined approach to acquisitions, including in relation to its dividend policy and credit rating, which are well-established. Any potential offer for Shire, if made, would have to align with this strict investment criteria.
Back to Shire:
Shire's been tipped as a takeover target for ages - Takeda biting
Shire #SHP shares adding 18pts to the FTSE 100 today and lifting it off the lows - announcement at 10:23 clear to sees on index pic.twitter.com/DzDRxo8yUb
More from the CBI’s high street survey:
#Retail sales fell on a year ago as cold weather gave retailers the chills, according to March #CBI_DTS https://t.co/DGwqkh3E6T pic.twitter.com/AqvhErsomL
Online #retail sales growth in the year to March slowed to its lowest since records began in 2009 #CBI_DTS https://t.co/DGwqkh3E6T pic.twitter.com/c97VsGMOSU
More bad news for the high street, with a new survey showing a slump in sales this month. Reuters reports:
British retail sales fell for the first time in five months in March as heavy snowfall combined with the financial strains on many households, a survey by the Confederation of British Industry showed on Wednesday.
The CBI distributive trades survey’s retail sales balance fell to -8 from +8 in February, confounding a median forecast of +15 in a Reuters poll of economists.
“Against a backdrop of stagnating household incomes and weak consumer confidence, the lengthy cold snap earlier this month has heaped added pressure on retailers,” Ben Jones, a CBI economist, said.
“Freezing conditions and transport disruption caused people to avoid the high street. With many forced to work from home, telecoms firms saw record internet traffic, yet on-line shopping slowed sharply given the potential for disrupted deliveries.”
A measure of sales for the time of year was the weakest since April 2013, the survey showed.
Retailers expected sales volumes and orders to grow in April but only at a subdued pace.
Elsewhere, the latest report from the Bank of England’s network of regional agents has just come out with some good news to cheer British workers. Used to detect early warning signs for the economy, the quarterly report compiles the views of businesses recorded by the Bank’s 12 regional outposts.
In their latest assessment, the agents say companies are handing out pay rises worth between 2.5% and 3.5% - which would be inflation-busting for staff at the top end of that range. Firms are also telling the agents inflation is beginning to fade.
Elsewhere in the report for the first three months of the year, there’s an interesting look at how company chief executives are preparing for Brexit. Apparently, two fifths from more than 3,000 firms surveyed are not spending any time at all each week on Brexit. They had better hope the government’s transitional arrangements, agreed in principal earlier this month, will help smooth the process as advertised.
This is either a massive sign of complacency, or the whole Brexit thing really isn't much to worry about. Bank of England agents survey shows 41% of CEOs spend no time at all planning for Brexit... pic.twitter.com/hPNC24A4Uc
Meanwhile, there’s a contrarian view over the collapse of Carillion. Far from being the disaster for the wider construction industry forecast by experts, firms tell the agents it hasn’t had much of an impact at all.
There has been “little evidence of a significant impact on the supply chain or on the availability of credit to the sector” so far, the agents report.
Shire shares - which climbed as high as £38.79 on news of the possible approach by Takeda - have come off their best levels.
The rather conditional nature of the Japanese statement means Shire is now at £35.45, still 15% better on the day.
Takeda says it is at a preliminary and exploratory stage in considering a bid, and no approach has been made to the Shire board.Takeda says it is at a preliminary and exploratory stage in considering a bid, and no approach has been made to the Shire board.
Meanwhile Takeda - Japan’s biggest pharmaceutical company - is worth some £29bn. This is less than Shire’s value after today’s jump, but around the same as the UK-listed company was worth at last night’s closing price.Meanwhile Takeda - Japan’s biggest pharmaceutical company - is worth some £29bn. This is less than Shire’s value after today’s jump, but around the same as the UK-listed company was worth at last night’s closing price.
Shire is worth £35bn after its shares jumped to £38 on the news of Takeda’s possible approach.Shire is worth £35bn after its shares jumped to £38 on the news of Takeda’s possible approach.
Breaking news:Breaking news:
Pharmaceutical group Shire has soared 25% after Japan’s Takeda says it is considering making a takeover approach to the company.Pharmaceutical group Shire has soared 25% after Japan’s Takeda says it is considering making a takeover approach to the company.
Takeda has until 5pm on 25 April to decide whether to make a firm bid or walk away.Takeda has until 5pm on 25 April to decide whether to make a firm bid or walk away.
The Easter break couldn’t have come at a worse time for stock markets, says David Morrison, senior market strategist at GKFX:The Easter break couldn’t have come at a worse time for stock markets, says David Morrison, senior market strategist at GKFX:
Investors were already on edge having been shocked by February’s equity sell-off triggered by the dual spike in volatility and bond yields. Despite a strong rebound, the major stock indices remain fragile with many in danger of breaking back below some major technical levels – in particular, the lower level of the S&P’s bullish trendline advance since February 2016. This has been brought sharply into focus with the sell-off in tech stocks, which have lead the market rally for so long, catalysed by the scandal surrounding Facebook’s cavalier attitude to its users’ data.Investors were already on edge having been shocked by February’s equity sell-off triggered by the dual spike in volatility and bond yields. Despite a strong rebound, the major stock indices remain fragile with many in danger of breaking back below some major technical levels – in particular, the lower level of the S&P’s bullish trendline advance since February 2016. This has been brought sharply into focus with the sell-off in tech stocks, which have lead the market rally for so long, catalysed by the scandal surrounding Facebook’s cavalier attitude to its users’ data.
Now we have a long holiday weekend which coincides with the close of the first quarter. Once again, bonds are in focus – particularly the US 10-year Treasury. But this time yields have slumped with the 10-year crashing back below the key 2.80% level which has held as support for the past six weeks. Investors are piling back into the perceived “safe haven” of fixed income as stock markets slide...Now we have a long holiday weekend which coincides with the close of the first quarter. Once again, bonds are in focus – particularly the US 10-year Treasury. But this time yields have slumped with the 10-year crashing back below the key 2.80% level which has held as support for the past six weeks. Investors are piling back into the perceived “safe haven” of fixed income as stock markets slide...
And this comes against a backdrop of tighter monetary policy from the Federal Reserve, concerns over the outbreak of trade wars and worries about changes in key White House personnel leading to a more hawkish foreign policy. All-in-all, investors will see plenty of reasons to reduce equity exposure as we head into the weekend.And this comes against a backdrop of tighter monetary policy from the Federal Reserve, concerns over the outbreak of trade wars and worries about changes in key White House personnel leading to a more hawkish foreign policy. All-in-all, investors will see plenty of reasons to reduce equity exposure as we head into the weekend.
Markets could be in for a run of volatility similar to the summer of 2015, says Chris Beauchamp, chief market analyst at IG:Markets could be in for a run of volatility similar to the summer of 2015, says Chris Beauchamp, chief market analyst at IG:
Markets remain under pressure as the sell-off in tech spreads once more to the wider equities space. The bounce on Tuesday looks like a flash in the pan, with more and more investors heading to the exit.Markets remain under pressure as the sell-off in tech spreads once more to the wider equities space. The bounce on Tuesday looks like a flash in the pan, with more and more investors heading to the exit.
It is looking increasingly likely that we have a re-run of August 2015 on our hands; equities then had months of volatility to contend with before the rally resumed. With trade wars and the tech scandal weighing on sentiment we may well have more downside to content with...It is looking increasingly likely that we have a re-run of August 2015 on our hands; equities then had months of volatility to contend with before the rally resumed. With trade wars and the tech scandal weighing on sentiment we may well have more downside to content with...
The rout in global growth stocks has been seen in the falls in mining and bank names in London. Particularly hard hit among the banks are the Asia-focussed giants HSBC and Standard Chartered, while miners have seen further outflows as investors downgrade their optimistic views on global economic expansion.The rout in global growth stocks has been seen in the falls in mining and bank names in London. Particularly hard hit among the banks are the Asia-focussed giants HSBC and Standard Chartered, while miners have seen further outflows as investors downgrade their optimistic views on global economic expansion.
Oil prices are on the slide after a surprise rise in US stockpiles.
Brent crude is currently down 0.6% at $69.68 a barrel while West Texas Intermediate - the US benchmark - is 1% lower at $64.6.
The American Petroleum Institute said late on Tuesday that US weekly crude stocks had risen unexpectedly by 5.3m barrels to 430.6m barrels.
Here’s an interesting chart on market bubbles:
A brief history of recent asset price “bubbles”… pic.twitter.com/3vPfZEFIU4
The eurozone is seeing steady economic growth, thanks to a revival in world trade, according to S&P Global Ratings. In a new report, the agency says:
Global momentum has lifted the eurozone’s economic prospects, and it now appears to have reached cruising altitude. The economic and monetary union closed 2017 on a high note, with GDP growth at 2.5%, its fastest pace in a decade.
...S&P Global Ratings’ economists say the chief reason for this is the revival of world trade, which has put the eurozone’s industries back in motion. Capacity utilization was just short of its 2007 high, triggering stronger investment and boosting industry prospects for this year.
However, the general fall in sentiment surveys at the start of 2018 indicates that eurozone growth is leveling off. Firms are increasingly reporting that supply constraints, rather than demand, are a drag on output. Nonetheless, for now, we expect the growth momentum will stay solid, thanks to the broad-based economic expansion and strong domestic fundamentals.
It added:
Strong fundamentals in the eurozone suggest that economic expansion will continue at a brisk pace, and we have raised our GDP growth forecasts for the region to 2.3% this year and 1.9% in 2019.
We’ve also raised our euro-dollar exchange rate forecast to $1.27 in 2018 and $1.3 in 2019, since we expect the dollar’s weakness will persist.
The current growth cycle appears to have peaked, but the remaining slack in the labor market and productivity rebound will keep inflationary pressures in check until the end of 2019.
Because inflation will likely remain subdued this year, we expect the ECB will only gradually wind down its asset purchase program from September until the end of this year. As the gap between structural and real unemployment diminishes, earnings growth will accelerate. Thus, we think underlying inflation is set to move closer to the ECB’s target at the end of 2019, giving the ECB enough leeway to raise rates in Q3 2019.
#ftse100 under pressure, trend support being tested, touch here could signal a chance to rally? pic.twitter.com/FAa65abmtJ
Meanwhile the pound is edging higher, up 0.16% against the dollar at $1.4177 and 0.21% better against the euro at €1.1430. Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi, said:
The ongoing reduction in Brexit risks and more hawkish outlook for Bank of England policy are the key drivers behind the pound’s upward momentum.
The pound has derived some additional support from a report that Irish officials have been told to expect new plans “imminently” on how Britain plans to avoid a hard border with Northern Ireland. While short on details, the report has further boosted confidence that the UK and EU can find a workable and timely solution to the Irish border issue to support plans for a “smooth & orderly Brexit”. Nevertheless, it still remains a potential banana skin for the pound in the coming months if intensified Brexit talks do not progress as well as hoped.
Among the day’s company news, furniture group DFS has bucked the gloom in the high street with an upbeat outlook.
It reported a 7.4% fall in underlying half year profits to £30m, in line with expectations, and chief executive Ian Filby said:
We have seen a strengthening trading performance across the first half of the financial year and through February into March. We therefore remain confident that, despite the current challenging market conditions, the group will deliver modest growth in [earnings] and generate strong cashflow across this financial year, in line with our expectations.
Analysts at Stifel issued a buy note, saying:
Management is striking a confident tone today (despite a challenging market), as the group heads into an easier comparison phase....The shares were pricing in bad news, so we’d expect to see a decent relief rally today.
Indeed the shares are up nearly 6% in early trading. Stifel added
We still believe in the long-term attractions of DFS Furniture. It is a highly cash generative market leader, which is consolidating the physical market at the same time as some online pure players re-evaluate their business models.
More on the tech fallout, which saw the US FANG stocks have their worst day for more than two years. Naeem Aslam, chief market analyst at Think Markets, said:
The tech sector is predominantly getting battered, mainly due to the woes of Facebook’s data breach. We clearly have three kind of investors when it comes to the Facebook; firstly there are some who are jumping out of the ship, pushing the stock price lower. Secondly, we have investors who are watching the show from the sideline and thinking there is more pain to come as we do not know how big the potential fine could be. This is not helping the stock price either. Finally, we have those who are not interested in Facebook anymore as they think that the regulatory burdensome on Facebook is too risky for their appetite and they do not want to get involved in this stock.
We personally think, that Facebook has strong fundamentals and it has become the part of everyone’s daily life, so once we have a clear idea about the potential sum which the firm would have to pay as a result of this situation, the stock price could present a potential opportunity.
As for the FANG stock including Microsoft, Twitter, it is likely that the Facebook incident would open the door for more scrutiny for other firms, and lawmakers would see how other firms are using user data. This could really open the can of worms and open a potential opportunity for short sellers.
Following the falls on Wall Street and in Asia, European markets have indeed dropped back in early trading.
The FTSE 100 is down 0.7%, with software group Sage slipping 1.8% and mining shares also among the leading fallers. France’s Cac and Spain’s Ibex have fallen 0.9% while Italy’s FTSE MIB is 0.88% lower. In Germany, the Dax has dropped 0.77%.
In the wake of the decline of the US technology stocks, Europe’s tech index is down 1.1%.
Here are IG’s opening calls for European markets:
European Opening Calls:#FTSE 6946 -0.78%#DAX 11868 -0.86%#CAC 5069 -0.91%#MIB 22008 -0.91%#IBEX 9398 -0.80%
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
An early rally on Wall Street went south by the close of play yesterday, and the turnaround is likely to weigh on European markets at today’s open.
Relief that the US and China appeared to be talking about averting a damaging trade war between the world’s two biggest economies had given some support to markets. But a tech turnaround saw the Dow Jones Industrial Average drop 1.4% while the Nasdaq Composite dropped 2.93% and the S&P 500 fell 1.73%.
The so-called FANG technology stocks - Facebook, Amazon, Netflix, and Google (now Alphabet) were under pressure on fears of growing regulation in the wake of the Cambridge Analytica revelations. Tesla was also a big faller, down more than 8% on news of a Federal investigation into a fatal crash in California.
The drop in the US filtered through to Asia, with the NIkkei 225 down 1.4% and the Hang Seng 1.57% lower.
In Europe the FTSE 100 is forecast to open down around 50 points, back below 7000, while Germany’s Dax could drop 120 points after European markets ended higher on Tuesday. Michael Hewson, chief market analyst at CMC Markets, said:
For all the gains seen in US markets over the past 18 months the bulk of these have been driven by tech stocks, and yesterday these tech stocks swooned quite sharply, reversing a good proportion of Monday’s gains, in the process dragging the S&P500 back down towards its 200 day moving average.
This rolling over in tech stocks looks set to weigh on European markets this morning, with a lower open as markets mull over the potential for uncertainty over a tech sector that could catch a cold as a result of Facebook’s woes around user data.
With the increasing focus on what is going with respect to how Facebook has managed its users personal data, it must surely be only a matter of time before attention turns to the rest of the tech sector, and how companies like Alphabet, Twitter, Microsoft and Apple to name a few, manage their own users personal data. If lawmakers do turn their attention to the rest of the sector, which seems likely, then it is hard not to see how other tech companies will escape scrutiny on how they use this user data, raising the prospect that we could uncover other practices that invite scrutiny.
In the run-up to the Easter break there is a smattering of economic news in the form of the CBI’s monthly snapshot of the retail sector and the latest US GDP figures. The US economy is expected to have grown by 2.7% in the fourth quarter on an annualised basis, up from 2.5%. Jasper Lawler at London Capital Group said:
The economic backdrop was supportive in the last quarter of 2017. Robust jobs growth and healthy consumer spending comfortably propped up the economy, which is expected to be reflected in an upwards revision for economic growth to 2.7% on an annualised basis from 2.5% in the previous estimate. The reading will not yet include the benefits from the tax cuts, nor the more recent uncertainties over global trade. However, given how quiet the economic calendar is, the reading is expected to attract attention anyway.
A surprise to the upside, could boost the possibility of a June rate hike up from the CME FedWatch odds of 78%, lifting the dollar back towards 90.00. On the contrary, should growth remain around 2.5%, we could see buying demand for the dollar decline and the greenback look to test 89.00 once more.
The agenda:
11.00 BST: CBI distributive trades survey
13.30 BST: US fourth quarter GDP