Rate worries depress markets, FTSE manages to hold firm and Microsoft sees potential green light on Activision deal

“Thursday was a truly miserable day for US stocks, with the Nasdaq down 1.8% and the S&P falling 1.6%. The prospect of interest rates staying higher for longer has given investors a lingering headache and sentiment has worsened as the week progressed,” says Russ Mould, Investment Director at AJ Bell.

“Europe followed suit on Friday albeit recording less severe losses than Wall Street last night.

“While the Dax, CAC 40 and IBEX 35 fell between 0.3% and 0.6%, the FTSE 100 only slipped five points to trade at 7,673. Healthcare, technology, energy and financials gave support to the UK index, offsetting weakness from industrials, mining, real estate and consumer-facing stocks.

“Many investors had hoped we would approach the end of 2023 with a clearer picture on when interest rates will start to be cut. That scenario has now been muddied by comments from the Fed that it is prepared to raise rates further if necessary and keep a restrictive policy until there are clear signs that inflation is moving back to target levels.”

Microsoft

“Buying a company often comes with complications, as Microsoft has experience over the past 20 months. In January 2022, the company announced its intention to buy Activision Blizzard for $68.7 billion to strengthen its position in the gaming sector. Since then, the deal has been wrapped up in a series of complications centred around competition issues.

“The UK’s competition authority now suggests a solution has been found which could pave the way towards a green light on the deal.

“It will involve Microsoft not acquiring the cloud gaming rights, which would mean it cannot limit access to Activision’s games to its own cloud service or stop rivals from offering them. Instead, Ubisoft will buy the cloud gaming rights and be able to offer the products to all cloud gaming providers. Furthermore, Microsoft will not be allowed to restrict Activision games to the Windows operating system.

“This is more than a simple concession, but it’s a sacrifice that will be necessary to get the acquisition over the line.

“There have clearly been frustrations behind closed doors as the boss of the CMA had a real dig at Microsoft in the announcement, saying it would have been ‘far better if Microsoft had put forward this restructure during our initial investigation’. That suggests the CMA can’t wait to wash its hands of the matter.”

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