Prudential bid for AIG may be off the table

Prudential Plc confirmed yesterday that it was seeking to renegotiate part of its takeover of giant US insurer AIG, namely the price of its main Asian life assurance arm. Prudential shares rose 1.69% when trading resumed in Hong Kong, having been suspended in the morning.

Pound Sterling – UK Markets

A light day for data has left the market focusing on risk and equity movement, with an eye on Prudential developments. Yesterday’s gains against the USD on the back of the takeover have been sustained and this morning trading levels of 1.4585 hovered at a 2-week high. Sterling rose to an 11-month high against the Euro yesterday fuelled by persistent structural concerns in the single currency. This morning those gains were pared somewhat, with levels at 1.1761. British consumer confidence fell for the third month in a row in May, but the market appears to have largely shrugged this off as the pound continues to be supported by the forecast of higher interest rates to come, possibly in the latter part of the year.

US Dollar – US Markets

The greenback continues to be under pressure from an improving risk outlook on the Eurozone side, with Euro stocks trading at steady gains. Losses against the pound following the uncertainty regarding Prudential’s takeover of AIG have been sustained this morning.

Euro – European Markets

Yesterday’s losses versus sterling have been reversed in part today with stocks trading higher. The single currency remains vulnerable, however, with continued concerns over its structure and Spain’s announcement yesterday of severe austerity measures to stave off economic disaster. With risk appetite improving, the Euro traded at an improved level versus the dollar at 1.2394 this morning.

Other Currencies – Highlights

After a prolonged period of strength the AUD, NZD and other Asia-backed currencies have weakened over the last few weeks following worries that China’s economy is slowing. This is impacting on demand for commodities and slowing growth. Against the pound the AUD, for example, has lost around 6.5% and over 12% versus the USD in the last month. There are signs over the past two days that these losses may be temporary however. GBP/AUD traded at 1.7082 this morning, which was an improvement of around 5 cents from recent lows.