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Written by Boris Schlossberg Senior Strategist

GBP/USD firmed considerably in early London trade today boosted by strong Merger and Acquisitions  activity and an impressive jump in Construction PMI results. Japan’s Softbank secured financing for the £10.9 Billion acquisition of Vodaphone’s  Japanese business interests and traders speculated that another UK concern, Prudential PLC may be a target of US investment interests as well.  Additionally, Construction PMI registered a reading of 54.7 up from 51.9 and well above the 52.2 forecast. The Construction PMI data stood in sharp contrast to yesterday’s tepid PMI manufacturing results and suggested that UK housing market remains robust alleviating any concern regarding possible BOE rate cuts in the near term. At 10:GMT sterling was trading at 1.7460 higher than the 1.7400 close in New York on Monday.

 

London equities were lower in morning trade on Tuesday as miners fell on profit taking following recent gains and Tate & Lyle was hit by reports from the US questioning the safety of its Splenda sweetener. The FTSE 100 was down 21.6 points, 0.4 percent lower at 6,002.7 while the mid-cap FTSE 250 gained 12.3 points, or 0.1 percent to 9,893.3 in mid-morning trade. Tate & Lyle declined following reports that consumer advocates in the US said the group’s Splenda artificial sweetener may cause stomach pains and other digestion problems and should be pulled from the market until research into its safety can be done. Tate & Lyle fell 2.2 percent to 563p in morning trade on the news. Mining stocks fell as investors took profits following recent gains on the back of strong copper prices. Antofagasta lost 1.2 percent to £21.62, while Rio Tinto fell 1.3 percent to £30.14 and BHP Billiton was down 1.1 percent at £11.06. Sweets and soft drinks group Cadbury Schweppes was down 1.5 percent at 564½p after it announced it was to sell Bromor Foods to Tiger Brands £109m in cash. Anglo-Dutch steelmaker Corus Group shed 1.4 percent to 86p taking its cue from Luxembourg-based steel company Arcelor which traded down as it prepared its bid to fend off the unsolicited advances of rival Mittal Steel. Utilities were higher following an upbeat trading statement from Severn Trent. The water company said it expected annual profit before interest and tax for Severn Trent Water to be some 30 to 35 percent higher than the prior year. The group also announced the demerger of its UK integrated waste management business, Biffa. Shares in Severn Trent rose 6.9 percent to £12.04 pulling Pennon Group 1.9 percent higher to £13.48 and Northumbrian Water up 0.4 percent to 236¾p.

 

Strong UK construction PMI data drove UK Gilts lower with futures trading down -10 ticks to 111.39 as fixed income traders reacted to positive economic data.