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June 4, 2018, 1:23 p.m. EDT

FTSE 100 gains as European political turmoils settles, M&A comes into focus

U.K. construction activity steadies in May, but PMI above expectations

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By Carla Mozee, MarketWatch

AFP/Getty Images

U.K. stocks ended higher Monday, still finding relief as political turmoil in continental Europe subsided, while finding fresh upward momentum from merger and acquisition news.

How markets performed

The FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX +0.06% climbed 0.5% to end at 7,741.29, its best close since May 23, according to FactSet data. Telecom and utilities led advancing sectors while the health care group fell. On Friday, the benchmark rose 0.3%, trimming last week’s loss to 0.4%.

The pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.1543% gave up earlier gains and fell to $1.3315, down from $1.3350 late Friday in New York.

What drove markets

The FTSE 100 landed a second straight win Monday as it continued to shake off worries about political instability in Italy and Spain that contributed to last week’s loss for London’s blue-chip benchmark. In Italy, a political crisis that rocked global markets was resolved Friday with the swearing-in of a new government after populist parties the 5 Star Movement and the League formed a coalition administration.

In Spain, Socialist Party leader Pedro Sánchez was sworn-in as prime minister on Saturday after Mariano Rajoy was ousted in a parliamentary vote of no confidence. At the same time, Madrid ended direct rule in Catalonia, letting go of controls put in to resist a push for the region to self-govern.

Deal talk directed market action as the first full trading week in June started, with FTSE 100 constituent DS Smith PLC in a deal to buy a Spanish packaging company. M&A talk was also a key factor that moved the broader European equity market /zigman2/quotes/210599654/delayed XX:SXXP -0.19%  on Monday, with Italian bank UniCredit SpA /zigman2/quotes/200769686/delayed IT:UCG -0.19%  and French lender Société Générale SA in early-stage talks about a possible merger, according to a Financial Times report.

Read: Buy the dip with Italy’s stocks? Why you may want to just say no

And check out: Think the Italy panic was bad? Just wait until central banks turn off the spigot

This week, investors may turn their focus back to trade tensions after weekend trade talks between the U.S. and China ended with little sign of progress. The world’s two largest economies moved closer to imposing tit-for-tat tariffs on one another.

In addition, six of the Group of Seven industrialized nations have issued a rare condemnation of the 7th member, the U.S., over its trade policy. President Donald Trump’s administration has imposed steel and aluminum import levies on some of the U.S.’s biggest allies, including the European Union, Mexico and Canada. The Group of Seven of the world’s largest advanced economies will begin a summit on Thursday in Quebec.

Stock movers

DS Smith PLC /zigman2/quotes/208795576/delayed UK:SMDS +0.73% gained 3% and hit an all-time high at £5.83 after the packaging producer struck a deal to buy Spain’s Papeles y Cartones de Europa SA , known as Europac, for about 1.67 billion euros ($1.95 billion).

But shares of Irish packaging maker Smurfit Kappa Group PLC /zigman2/quotes/208768615/delayed IE:SK3 +0.38% sank 7.2%. Smurfit in May rejected an €8.9 billion euro ($10.6 billion) takeover approach from International Paper Co. /zigman2/quotes/200533549/composite IP +0.08%  and IP has until Wednesday to make a new offer or walk away, an Irish takeover paneled has ruled.

On the FTSE 250, CYBG PLC  moved up 2.2% after the parent of lenders Clydesdale and Yorkshire Bank raised by 7% its proposed all-share offer for Virgin Money Holdings PLC, a bank backed by billionaire Richard Branson. Virgin shareholders would own around 38% of the company, up from around 36.5% under the old offer. Virgin Money shares closed up 0.6%.

Back on the FTSE 100, easyJet PLC /zigman2/quotes/202825892/delayed UK:EZJ +0.45%  leapt 3.8% to £17.79, with Deutsche Bank raising its price target on the airline to £19.15 from £15.60.

BT Group PLC /zigman2/quotes/209006687/delayed UK:BT.A -0.03%  rose 0.6%. Some BT investors are questioning Chief Executive Gavin Patterson’s future at the telecommunications operator following the company’s biggest restructuring in a decade, five of the company’s top 20 shareholders told the Financial Times.

Royal Bank of Scotland Group PLC   ended up 0.6%. After Monday’s close, the U.K. Government Investments office said it would resume selling shares in RBS through a placement to institutional investors. That move will cut the government’s stake in RBS to 62.4% from 70.1%. The government bailed out RBS and other banks during the financial crisis a decade ago.

Economic data

U.K. construction activity remained subdued in May, said IHS Markit/CIPS whose purchasing managers’ index was unchanged in May at 52.5 from April. But the May reading was above the 51.7 print expected in FactSet consensus estimate.

What strategists are saying

“Not even U.K. construction PMI surprising to the upside has been sufficient to keep the pound buoyant,” as “new orders fell and companies have grown more pessimistic about the outlook for growth”, wrote Fiona Cincotta, senior market analyst at City Index. “The pound was struggling back towards $1.33 versus the dollar after failing resistance at $1.3380. Investors will now look towards the all-important service sector PMI,” on Tuesday, she said.

+4.24 +0.06%
Volume: 47,907
Jan. 20, 2022 8:32a
US : Tullett Prebon
+0.0021 +0.1543%
Volume: 0.0000
Jan. 20, 2022 3:47a
-0.93 -0.19%
Volume: 0.00
Jan. 20, 2022 9:32a
IT : Italy: Milan
-0.03 -0.19%
Volume: 1.63M
Jan. 20, 2022 9:27a
P/E Ratio
Dividend Yield
Market Cap
€30.27 billion
Rev. per Employee
UK : U.K.: London
385.00 p
+2.80 +0.73%
Volume: 70,789
Jan. 20, 2022 8:32a
P/E Ratio
Dividend Yield
Market Cap
£5.22 billion
Rev. per Employee
IE : Ireland: Dublin
+0.18 +0.38%
Volume: 20,718
Jan. 20, 2022 8:32a
P/E Ratio
Dividend Yield
Market Cap
€12.04 billion
Rev. per Employee
$ 49.35
+0.04 +0.08%
Volume: 2.65M
Jan. 19, 2022 4:03p
P/E Ratio
Dividend Yield
Market Cap
$19.10 billion
Rev. per Employee
UK : U.K.: London
628.00 p
+2.80 +0.45%
Volume: 385,756
Jan. 20, 2022 8:32a
P/E Ratio
Dividend Yield
Market Cap
£4.79 billion
Rev. per Employee
UK : U.K.: London
189.85 p
-0.05 -0.03%
Volume: 1.07M
Jan. 20, 2022 8:32a
P/E Ratio
Dividend Yield
Market Cap
£18.49 billion
Rev. per Employee

Carla Mozée is a reporter for MarketWatch, based in London. Follow her on Twitter @MWMozee.

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