European markets are set to get their chance to react to Friday’s stress test results as the market opens this morning, and after strong gains on Wall Street on Friday it could be that we get set for a stronger open.

The stress test results offered up no real surprises on Friday as only 7 of the 91 banks failed the test. The inevitable feeling that the tests were too lenient will be the dominating force today as the unpicking of the results can begin. Despite the cynicism the stress tests results are likely to help European indices add to gains this morning and start the week off on a positive footing.

There is other news circulating around this morning, the most notable of which is the unsurprising news that BP CEO Tony Hayward is in the process of negotiating an exit package. Ever since Mr Hayward told the media he wanted his life back it seems that he had been a dead man walking, and the task now begins of not only cleaning up the affected area in the gulf but also the much more arduous task of cleaning up the company’s reputation.

More than one-fifth of the constituents of the FTSE 100 are set to make trading statements in the last week of July so there is heavy competition for attention, but there is little doubt that the second quarter update from oil giant BP is the one the market and the press are most eagerly anticipating.

The company has not spent much time out of the spotlight since the oil leak in the Gulf of Mexico occurred on 20 April, but the results announcement will give the company the opportunity to demonstrate that other parts of the business have not been neglected while senior management has been fire-fighting the Gulf of Mexico crisis.

Today sees another company recently in the news, Reckitt Benckiser, releasing its interim results. The company announced an agreed £2.5bn bid for foot care and condom firm SSL on Wednesday, raising fears that the company may be finding it harder to achieve organic growth.

The acquisition of SSL has long been rumoured and some investment analysts are asking why it is taking place now, though the answer may simply be that the decline in the value of sterling has made SSL very attractive to US companies such as Johnson & Johnson and Colgate-Palmolive.

Chip designer ARM will have been among the more enthusiastic of cheerleaders when Apple announced record results earlier this week. The company’s intellectual property is used in most of Apple’s hot products and this has not gone unnoticed by the market, which has chased the shares 10% higher this week.

Ahead of the open we expect to the FTSE to open up 30 points at 5,343, the DAX up 25 at 6,191, and the CAC up27 at 3,634.

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Article by James Hughes, Analyst, CMC Markets.

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