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Investment market update

Early Trading

UK stocks are expected to open flat to slightly higher this morning, with equity markets continuing to trade cautiously in the wake of last week’s decision by the Federal Reserve to hold interest rates at current levels.

World Markets

Asian stocks regained some of Monday’s losses, buoyed by Australian and Hong Kong shares. Australian shares, which sank more than 2% Monday, regained 0.6%, led by energy producers after oil rebounded. The Shanghai Composite Index climbed 0.7%, extending a 1.9% gain on Monday. The Hang Seng Index advanced 0.7%.

US stocks advanced as investors took an optimistic view on domestic growth amid reassuring comments from Federal Reserve policy makers. PayPal increased 4%, the most in three weeks, after Stifel Financial Corp. raised the shares to buy from hold. Apple and Microsoft advanced more than 1.4% to help pace the rally among tech companies. The Nasdaq Biotechnology Index fell 4.4% after Democratic presidential candidate, Hillary Clinton, tweeted that she would release a plan to combat the high cost of prescription drugs.

UK stocks gained yesterday after a two-day drop, with Shire Plc climbing the most. Shares of the health care company rose 3.3% after it got European Commission approval for a drug attention deficit hyperactivity disorder in children and adolescents. RSA Insurance Group Plc fell 21% after Zurich Insurance Group AG abandoned its takeover bid. Shares in the satellite firm Inmarsat rose more than 1% after it announced a deal with Deutsche Telekom to bring passengers in-flight internet. Deutsche Telekom will supply the 4G, while Inmarsat will supply the satellite access.

Headlines

The US Justice Department is investigating Volkswagen AG over its admission that it cheated on federal air pollution tests. That adds the spectre of criminal proceedings to challenges the world’s biggest automaker already faces from regulators, lawmakers and vehicle owners in the three days since it admitted that it had rigged diesel vehicles to pass emissions tests in the lab.

Chancellor of the Exchequer, George Osborne, is seeking to strengthen Britain’s ties with China, including a possible stock-exchange link, as he underlines the country’s value as an investment partner in spite of recent market shocks. A couple of other possible deals the Chancellor announced included financing for Chinese construction of a new UK nuclear plant and the issue of yuan-denominated bonds in the UK.

A day after a tweet about high drug costs from Hillary Clinton sent pharmaceutical and biotechnology stocks lower, the Democratic presidential candidate said that if elected, she’d implement programs to force the industry to concede tens of billions of dollars a year in tax breaks, lower prices and increase research spending. Clinton’s proposals are a mix of programs that build on policy already in the Affordable Care Act, including caps on out-of-pocket spending.

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