On Friday, those hoping for a quiet end to the week were sorely disappointed by reports of blockbuster M&A activity, and a bumper Non-Farm Payrolls report that sparked sharp swings in stocks and bonds.
Friday had started with reports of takeover interest in Aviva, and in the US, ExxonMobil was reported to be in talks to acquire peer Pioneer in a $60bn deal.
Aviva shares soared in London, and Pioneer jumped in the US premarket as a sense of optimism crept back into equities. The FTSE 100 rose in early trade.
However, at 1.30pm in London, the monthly US jobs report was released and the optimism that punctuated Friday morning quickly evaporated.
The US economy added a bumper 336,000 jobs in September – much higher than the 170,000 predicted by economists. Such a hot reading of the US economy immediately sent bond yields higher, and equities dumped.
“The stronger jobs data consolidates the Fed’s position to keep monetary policy restrictive, and it puts greater weight on the likelihood of another rate hike before year-end,” said Daniela Hathorn, Senior Market Analyst, Capital.com.
Fears earlier in the week that US interest rates would remain elevated for a prolonged period were replaced with fears interest rates would have to rise again before staying elevated.
The FTSE 100 was down 0.1% to 7,442 at the time of writing. The Index had touched highs of 7,496 earlier in the session.
Aviva was the FTSE 100’s top riser after the Times reported multiple parties were eyeing the insurer. Aviva rose as much as 7% on speculation a bid was on the cards.
“Is Aviva the next FTSE 100 takeover target? The market certainly seems to think so, judging by the 7% share price jump on Friday. Chatter that foreign players Allianz, Intact Financial and Tryg are among the potential interested parties has fired up the shares, hot on the heels of a bullish broker note earlier this week,” said Russ Mould, investment director at AJ Bell.
“What might they see in Aviva? Well, the business is forecast to have strong free cash flow and excess capital and its valuation is cheap. It has slimmed down in recent years to focus on the stronger parts of the group and there is now an opportunity to increase its position in bulk annuities which looks like a more prosperous market thanks to higher gilt yields.”