Paddy Power can buck the trend amid US merger talk

European markets are trading higher, as weakening euro and pound valuations help subdue bearish sentiment from arising 10Y yield and faltering North Korean diplomacy efforts. Meanwhile, a Paddy Power merger could see the firm grab the opportunity provided by the impending liberalisation in US sports betting.

• European indices higher amid rising dollar

• US 10Y yields subdue market sentiment across the pond

• Paddy Power merger could realign the firm after UK betting terminal crackdown

European markets are brushing aside fears over a breakdown in diplomatic efforts to denuclearise North Korea, with the continued deterioration in the euro and pound helping drive outperformance over US indices. The rise in US 10Y treasury yields remains an ongoing backdrop to market sentiment, with US markets falling sharply yesterday amid a seven-year high for the 10Y. With treasury yields rising, there is a fear that we could see investors drawn away from equities as the return becomes increasingly attractive after years of tumbling yields.

Just when investors began fearing the future for bookmakers in the UK, we are seeing great excitement over the prospect of a US revival in sports betting, with Paddy Power Betfair gaining sharply amid rumours of a potential merger with US firm FanDuel. The impact of government restrictions on fixed odds betting terminals is no doubt going to be hugely significant, with warnings of a potential 20,000 jobs being lost as the maximum stake is slashed from £100 to £2. However, today’s 7% rise for Paddy Power comes as investors hope that the firm can realign its interests towards the US and away from a shrinking UK market.

Ahead of the open we expect the Dow Jones to open 19 points lower, at 24,687.