Trump Topples Equity Markets

Thursday, 18 May: risk was very much taken off the table across the globe commencing with US trade yesterday, Asia in the early hours, and at the open in Europe today following further developments relating to Trump’s tenure in office. The S&P 500 closed over a percent lower, as the Nikkei 225 closed -1.32%, and in early trade the FTSE 100 was down almost -1.5%. The alarm bells in markets were set ringing as news hit the wire that President Trump tried to interfere with a federal investigation. Former FBI chief James Comey said in a memo that Trump has asked him to end a probe into former National Security Adviser Michael Flynn’s ties with Russia. This was only the latest drama to emanate from the Oval Office after Trump unexpectedly fired Comey and reportedly disclosed classified information to Russia’s foreign minister about a planned Islamic State operation. The aforementioned developments spooked investors across the globe, who harbour worries that the President would struggle to follow through on pre-election promises of tax cuts, deregulation and fiscal stimulus. Both the S&P 500 and the Dow notched their biggest one-day fall since September 9 as confidence in Trump evaporated.

Berendsen(+21.66%) soared higher today after details emerged that the textile services company refused a £2.05bn cash and share offer from French textile services firm Elis. Elis offered to acquire each Berendsen share for 440p, plus 0.426 of an Elis share, which would give Berendsen shareholders a 35% stake in the combined company. Elis said on April 28 it had made a written cash and share proposal to Berendsen to acquire it at 440p/share and 0.411 shares in the new company, valuing each Berendsen share at £11 each, however Berendsen’s board rejected this initial proposal and declined to engage in talks on Friday last week. Berendsen’s retort was that the offer ‘significantly undervalues’ the company, branding the offer ‘opportunistic’ – the saga continues.

In the latest in a string of UK-centric data, UK retail sales were shown as rising 2.3% on the month, a much stronger performance than the 1.5% growth predicted by economists polled by The WSJ. Furthermore, sales were clocked 4% higher than a year prior adding weight to the thesis that the economy is bouncing back in Q2, following a sluggish start to the year in Q1.Sterling was up by c. 0.58% on the news against both the euro and dollar.

Across Europe, indices were down as the FTSE 100 closed -0.89%, the CAC 40 -0.53% and the DAX -0.33%.

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