* U.S. equity index futures suggest modest opening gains
* Euro STOXX 600 index up ~0.5%
* Dollar, gold, crude, bitcoin all dip
* U.S. 10-Year Treasury yield ~1.21%
Aug 2 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at markets.research@thomsonreuters.com
WHEN M&A IS MADE IN BRITAIN (0914 EDT/1314 GMT)
The U.S. takeover of engineer Meggitt is just the
latest in a series of M&A moves targeting Britain recently.
Morrison, Ultra, Vectura and Sanne
are other examples but beyond the market moving
headlines hard data also backs the view that Britain has proved
a particularly fertile ground for M&A this year.
Cross-border M&A with a UK target has increased by 340% to
$132.5 billion year to date, the latest Refintiv data to
end-July show. That's about nine times the 39% growth seen in
Europe and well above growth in the Americas (+200%) and Asia
(+182%).
"Now after all the fear mongering post Brexit has been
proven wrong UK companies are certainly of interest," says a
London-based trader. "Many companies and also Private Equity too
are looking to diversify in regard to location and are often
underinvested in the UK".
And beyond the volumes, investors in UK Plc appear to like
it, whereas it is becoming harder for acquirers to get a bargain
even though British companies are not necessarily overvalued at
this stage.
Meggitt shares shot up more than 60% this morning and that
in turn has helped the domestically focused mid-cap and FTSE 250
index race to a new record high.
"I am quite impressed by the massive premium which is being
paid for Meggitt," says the trader.
And AJ Bell investment director Russ Mould notes: "Private
equity firms have a reputation for trying to get a bargain, but
their tactics have been fully exposed this year and it now seems
rare for the first offer to be the winning one."
For more reading: BREAKINGVIEWS-UK plc’s latest sale is far
from on the cheap
(Danilo Masoni)
*****
S&P 500: FROM BULLISH FODDER TO BEARISH DUST? (0900 EDT/1300
GMT)
Amid on-going Federal Reserve support, the economic
re-opening, S&P 500 Q2 2021 year-over-year earnings
growth running at nearly 90%, and now a $1 trillion
infrastructure bill unveiled by U.S. Senators raising hopes of
more fiscal stimulus, there certainly is plenty of fodder for
bulls to be excited about.
So far, the S&P 500 index's record closing high was
on Monday July 26. Since then the benchmark index has
essentially chopped sideways, ending Friday just around 0.6%
below that high.
With this, however, a contrarian measure of sentiment, based
on the CBOE equity put/call (P/C) ratio, is exhibiting a pattern
that has preceded periods of market instability:
With the SPX's all-time high close, the 5-day moving average
of the P/C ratio fell to 41.6%. This put it just slightly above
its relatively recent, multi-decade lows. This measure's
depressed readings can flag an excessively bullish, or
especially complacent market, vulnerable to a reversal.
Indeed, what may be a more robust bearish signal is when the
moving average puts in a higher-low, against a higher SPX high.
This pattern developed ahead of declines of varying degree over
the last two years or so, including the severe sell-offs in late
2018 and early 2020.
In the wake of its 37.6% December 7 trough, which was its
lowest reading since around the time of the Y2K tech-bubble
peak, the measure has put in higher lows at 37.8% on January 14,
38.4% on February 11, and 39.6% on June 14. It has since vaulted
to 54.2%, despite just a modest drop in the index.
Thus, this measure may be signaling cracks are forming in
what has been solidly bullish sentiment. If so, instability may
be just around the corner.
(Terence Gabriel)
*****
FOR MONDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EDT/1300 GMT
- CLICK HERE:
(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)
