Even though the indices made further progress on Thursday, they are retreating on Friday as investors get nervous as stocks approach recent highs and book profits ahead of a long weekend in the UK and the US.
FTSE 100
- UK stocks are lower after weaker German IFO data.
- Signs of fatigue in the IPO market could hurt sentiment in the short-term. Clothing company Fat Face pulled its IPO on Thursday, while insurance group Saga did go through with its IPO although its float price was lower than expected.
- Astra Zeneca/ Pfizer – it seems unlikely that AZ will change its mind by Monday’s deadline, instead we may need to wait until August before Pfizer could potentially increase its offer to try and tempt the AZ board. AZ shares continue to come under pressure as the market prices out the prospect of a deal, however declines could be limited if there is the prospect of another offer in the late summer.
- GBP has been hit by selling pressure on Friday. This could be a reaction to UKIP’s strong showing in the local elections, which has increased political uncertainty in the UK.
Europe:
- Fundamental news is dominating: German industrial confidence indicator the IFO was weaker than expected for May. This weighed on the single currency, which is testing 200-day sma support at 1.3638. A weekly close below this level would be a very bearish development.
- EU elections are in full swing – we have to wait for Monday for the results. It looks like the market is selling EUR into these elections, and there could be further downward pressure if we see big wins for the anti-EUR parties, particularly in Greece.
- The FX market is brushing off news that both Spain and Greece received upgrades to their sovereign credit ratings.
- The Eurostoxx index is fairly muted, but banks and media are the outperformers across Europe. Italian banks are moving higher after HSBC upgraded Banca Monte dei Paschi to neutral.
- Pandora, Orange and Remy Cointreau are the lead decliners.
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