European markets start the week devoid of ‘energy’, apart from energy stocks

<p>European indices started the new week trading mostly in flat to negative territory with the trading day expected to be rather quiet, with no major […]</p>

European indices started the new week trading mostly in flat to negative territory with the trading day expected to be rather quiet, with no major economic data or corporate earnings due out and the US markets shut for Martin Luther King day.

Funnily enough, whilst the markets can be seen as lacking in energy today, it is energy firms that are keeping indices afloat with strong gains in heavyweights BP and Royal Dutch Shell counterbalancing weakness in mining and banking stocks.

Traders cautious over EU meetingInvestors are trading cautiously today with little news to react to and a meeting of EU finance ministers to keep an eye on for any decision on increasing the European Financial Stability Fund for indebted states within the eurozone. Hopes are fading that there will be a top up to the fund with Germany seen as the chief stalwarts to any increase after Germany’s Foreign Minister appearing to distance the country from such action by stating that it is too early to discuss a top up when only a small amount of the fund has been tapped. This caution is convincing traders to cut their Euro longs today, with the single European currency falling almost 1% against the US dollar as a result.

Smith’s Group up 10%In an otherwise slow news day, bid talk surrounding Smiths Medical, the medical unit of Smiths Group, has kept traders interested. We have seen high buyer demand for shares of Smiths Group, which have rallied over 10% on news that it rejected a $3.9bn offer for the medical arm. There has been talk for sometime about a potential breakup of the Smiths Group businesses and the news this morning appears to cement that there are interested parties. Though the early indications of a new higher bid from Apax, who is rumoured to have made the rejected offer, appears unlikely with the offer being made at ‘best and final’ and deemed not high enough to justify disposal talks. The swift rejection is giving rise to speculation that the firm believes it could get a significantly higher offer than the $3.6bn initially presented. We have seen traders pick up shares this morning speculating that the unit is up for sale and a higher offer may be on the cards at some point.

Groundhog day?We have seen the FTSE continue to consolidate around the 6000 level and interestingly it matches a similar start to the year as 2010 where the FTSE consolidated around the 5500 level.  Last year however, market consolidation preceded a correction of around 8% and with technical analysts pointing to similarly bearish indicators this time around, the FTSE could see a correction this once again should it fail to break consistently above 6050 soon.

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