Positive start to March on both sides of the Atlantic

The FTSE 100 is currently up 28 points to 5,838 with DOW Futures up 35 to 10,361. Gains in the FTSE were pruned, after Prudential’s announcement that it was going ahead with the purchase of AIG’s Asian business for £23 billion ($35.5) sent the insurer down 11% to £5.34 (when the shares came back from suspension at 10.30, they were down 14%). The acquisition will be funded by a $20bn rights issue, the largest ever seen in the UK. Prudential will also issue $5bn of senior debt, while AIG will receive $5.5bn in new Prudential shares plus $3bn of convertible shares and $2bn of preferred shares. AIG is 80% owned by the US government, which will mean the US taxpayer owning a stake in the UK’s largest insurer.

The news of a possible €25-30 billion bail-out of Greece by Germany and France was circulating this morning. Greek debt would be purchased in the form of bonds, through their respective state owned banks. But the Greek government will need to commit to at least €4bn worth of cuts in public spending which given union opposition may be difficult to execute.

The British Pound has continued to fall heavily against the U.S dollar and Euro today after a weekend opinion poll put Labour only 2 points behind the Conservatives and there were fears that the Prudential deal with AIG would mean it would need to sell the Pound Sterling to buy U.S. dollars . The pound/dollar hit £1.49, a 2% fall on the day. Currency investors are increasing worried that the increasing likelihood of a “hung” parliament will delay any moves to reduce the size of the U.K. budget deficit.