London, England -- (SBWIRE) -- 08/21/2010 -- “Poor economic data out of the US yesterday continues to raise concerns amongst investors of a weak and slow recovery and as such, appetite for risk has taken a back seat forcing European Indices lower. The FTSE 100, DAX and CAC all fell between 0.3%-0.6% in the morning session.

Much of the selling we have seen has been focused on the miners and the banks. Two of the three main pieces of economic data out of the US yesterday; the Philly Fed and Jobless Claims both undershot expectations. This has triggered investors into cash preservation with a number of clients downsizing their long positions in riskier stocks such as the miners and the banks.

In truth however, it’s a Friday and we are now deep into the main holiday month which means that there are minimal volumes in the market. As a result, many moves are being overly exacerbated so whilst yesterdays economic data out of the US was poor, I question whether it really riled investors so much to warrant 1.5% falls in the main European Indices.

Support at 5178 under threat?

From a technical perspective, the FTSE is on track to suffer a third consecutive down day, losing 3% in the process. The FTSE needs to stay above the near term support level of 5178, where we have seen clients leave a number of buy orders hoping to capitalise on any small recovery. A fall below here could take the UK Index down to 5104.

M&A talk on the rise?

It has been an interesting week so far with mergers and acquisitions talk gathering momentum and this has kept investors interested. Today BG Group is the main riser on the Index with bid talk from Royal Dutch Shell gathering pace after a report in the Daily Mail, whilst Korea National Oil Corp has turned its bid for Dana Petroleum hostile, echoing a similar move by BHP for Potash Corp.

The fact that the rise in BG’s share price rally today has quickly gathered momentum throughout the morning session suggests that investors are bullish something could well happen with this story. It will be interesting to see if there is any profit taking towards the afternoon in case anything emerges over the weekend.

With M&A activity seemingly on the rise, this is keeping short term speculators biting at the bit. Interest rates are very low and with major firms successfully installing some stringent cost cutting measures over the course of the recession, some are now inevitably looking towards acquisitions to provide growth, particular in the resources sector where acquisitions could be cheaper than starting new projects.”

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