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Bid activity helps London equities

News that International Power is in talks with French competitor GDF Suez and a bid approach to Tomkins have helped to support the UK stock market this morning. However, there is still concern regarding the economic outlook for the UK, Europe and America with news that the Irish credit rating has been downgraded by Moody's. So will bid activity support markets in the short term?

As we have mentioned on numerous occasions, the relatively low UK exchange rate has attracted the attention of overseas investors looking to acquire UK assets at "reasonable prices". If as expected, the UK economy eventually recovers then the exchange rate should begin to strengthen and reduce the competitive edge which overseas investors have had for some time. Whether this is part of the reason for today's sudden flurry of bids is open to debate but there is no doubt that the relatively low exchange rate has had an impact.

It will be interesting to see if this flurry of activity continues in the short-term and whether indeed this is enough to support the stock market while the economy receives the attention of the UK government. It can sometimes be very difficult to rationalise the performance of the UK stock market against that of the UK economy.

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