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Stocks optimism fading & UK M&A

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Europe opens lower

Sentiment continues to sour this week in equity markets. European stocks have opened lower following another late sell-off in the US and some big declines in Asia. The Nasdaq 100 reversed a 1% gain to end 0.2% lower on in another daily reversal of sentiment. Another Brexit-led decline in Sterling is keeping losses on the FTSE 100 in check. It began as a rotation from the outperforming tech sector into the financial sector on tax reform progress. Sector rotations are morphing into more broad-based profit-taking into year-end.

Japan optimism fading

In Asia, the negativity is setting in too. Japans Nikkei stock average closed down 2% for its biggest loss of 2017. After such a strong run up following the re-election of Shinzo Abe, Japanese stocks look like theyve made an interim top. Investors looking for a haven in the yen in response to rising volatility in other markets will add to the woes of Japanese shareholders.

Shopping centre owners consolidate

Shares of Intu Properties have jumped following a 3.4bn offer by rival property Group Hammerson. The deal would create one of the UKs largest shopping centre operators. The offer of 353.9p per share is a 27% premium of the Dec 5 closing price. Intu shares were down over -25% YTD before the announcement so its an opportunistic buy. Intu share prices losses have accelerated on signs British shoppers are tightening purse strings. The cost of living squeeze on UK consumers from higher inflation is forcing companies like Hammerson and Intu into action. The new group will have a combined 21bn retail property portfolio. Online shopping means shopping centres and high street shopping are in a long-term malaise. Shareholders will want to see assets sold down in the merged company to help fund the deal and to reflect the lower demand for brick and mortar stores.

Tory Revolt heaps more political pressure on Sterling

Theresa May looks closer to losing power than at any point since the election. A day after losing support from the DUP for her text on the Irish border, she appears to be losing the backing of her own party on the issue of EU regulations. Conservative MP Jacob Rees-Moggs comment that the UK harmonising its regulations with the EU marks a red line in Brexit negations is an opinion widely-shared. The British pound is holding up remarkably well in the face of the latest Brexit problems. Sterlings resilience can be viewed as either markets looking through the noise with the belief the UK and EU will move onto trade talks eventually, or perhaps that new Tory leadership would mean a softer Brexit.

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About the author

Jasper joined the market analyst team in the London office in 2016, and has accumulated over ten years experience working in the financial markets.
He delivers regular commentary, seminars and webinars on market news, trading analysis, strategyand psychology. He is regularly interviewed by BBC News, Bloomberg, CNBC and Sky News, and has featured in The Times, Guardian and Daily Telegraph.

Before joining LCG, Jasper worked as a market analyst and as a market strategist at two other well-known broker-dealers in the City of London and on Wall Street.
He writes a widely-followed daily market wrap, plus commentaries on US, European and UK stock markets, FX and commodities. Jasper also hosts a weekly charting analysis webinar.
Jasper uses both technical and fundamental analysis. Fundamental analysis includes taking apart company earnings reports as well as reviewing economic data and the moves from central banks.
From a technical perspective he uses a systematic, trend following approach to trading. This typically involves a blend of price-action orientated trend and pattern analysis with the relative strength index (RSI) technical indicator to confirm changes in momentum.
He is qualified as a Chartered Market Technician (CMT) with the Market Technician Association, and has a degree in Finance and Economics.

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