Back with Shire, and Ketan Patel at EdenTree Investment Management says it could be a key moment if a deal goes ahead:

If a bid does materialise from Takeda for drug maker Shire, it would be a watershed moment for Japanese pharma. There hasn’t been a cross border transaction in the sector, excluding joint ventures and small generic M&A. Takeda’s cash laden balance sheet appears a good fit for Shire’s struggling balance sheet, following recent large scale M&A.

The attraction for Takeda is the highly lucrative rare disease market in the US, which comes with exceedingly high margins and is largely exempt from the usual pricing pressure that affects the wider pharmaceutical sector.

The stronger than expected US GDP figure will revive talk about how many interest rate rises the Federal Reserve will sanction this year. Dennis de Jong, managing director at UFX.com, said:

Robust jobs growth and healthy consumer spending have been attributed to today’s stronger than expected US GDP data, as the country’s economic outlook appears in rude health and the 3% growth target appears within touching distance.

...As a result of the strong economic outlook, questions may be raised around the possibility of Fed Chair Jerome Powell introducing a June rate hike.

It may be a case of US growth being monitored before any rate decision is made, but markets could be volatile between now and then.

The 2.9% growth in the US economy, although better than the initial estimates, shows a slowdown from the 3.2% rise recorded in the third quarter.

The figures were helped by the biggest rise in consumer spending for three years, offset by a surge in imports. The Bureau of Economic Analysis said:

The increase in real GDP in the fourth quarter primarily reflected positive contributions from personal consumption expenditures, nonresidential fixed investment, exports, residential fixed investment, state and local government spending, and federal government spending that were partly offset by a negative contribution from private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased.

Here’s some analyst reaction to the possible Shire deal. Peter Welford at Jefferies says the structure of any deal is uncertain:

We see the potential strategic rationale for the deal and have long highlighted Shire is currently trading at a substantial discount to our fundamental 4300p or so value given overhangs, notably haemophilia competitive concerns. Nevertheless Takeda’s near.$42bn market cap versus Shire’s $47bn or $66bn enterprise value raises questions on a potential deal structure....

We presume Takeda would need a significant equity raise to acquire Shire, suggesting a “merger” is perhaps better terminology, which may raise hurdles to the successful completion of any future deal.

Jack Scannell at UBS says other bidders could emerge:

Since Takeda’s market cap is close to Shire’s we assume a potential offer would have to include a substantial percentage in equity and how Shire’s board and shareholders would react is hard to predict. However as Shire’s share price is significantly below the net present value of our cash flow estimates, Takeda could trigger discussion of other bidders.

Shire does not strike us as an obvious take-over candidate. There is presumably a price at which the financial engineering would work. However, Shire’s specialty focus and mix of therapeutic foci means that most buyers would struggle to extract substantial operational synergies while escaping from competition problems, in our view. Also Shire’s low corporate tax rate could rise in most scenarios were the company acquired. It would also be a bold acquisition in our view given the uncertain trajectory of Shire’s haemophilia business. A merger of equals in this context might be more feasible.

The potential offer for Shire has helped the FTSE 100 come off its worst levels after the morning’s earlier declines.

The UK’s leading index is now down just 0.12% or around 8 points, with Shire up 18% and fellow drugs group GlaxoSmithKline 1.5% better.

Elsewhere though the fallout from the US tech slump continues. Germany’s Dax remains down 0.7%, while France’s Cac is 0.9% lower.

Meanwhile US futures are suggesting a rebound of sorts on Wall Street, with the Dow Jones Industrial Average forecast to open around 67 points higher.

Here’s our story on the possible takeover of Shire by Japan’s Takeda:

Shares in the UK-listed drugmaker Shire surged after Japan’s biggest pharmaceutical company, Takeda Pharmaceutical, said it was considering making a takeover approach.

Shire’s shares jumped as much as 33% to £38.79 on the news, and later traded 17% higher at £36, valuing the company at £32.8bn. Takeda’s market value is about £29bn, around the same as Shire’s at last night’s closing price.

Shire is best known for its ADHD drug Adderall but its focus in recent years has been on rare diseases. The company is based in Dublin for tax purposes but run from Boston. Most of its operations are in the US.

The news comes three-and-a-half years after US firm AbbVie abandoned its agreed $54bn (£34bn) takeover of Shire, after a US clampdown on so-called tax inversions by US companies buying an overseas business to secure a lower tax rate.

Shire then turned acquiror and completed its $32bn purchase of US firm Baxalta last June. In November it reported a drop in sales of haemophilia drugs, which became its biggest source of revenue following the deal.

The full report is here:

Here is the full statement from Takeda, which includes more detail of the Japanese company’s thinking:

Takeda believes that a potential transaction with Shire presents an opportunity to advance Takeda’s stated Vision 2025, build on its current strong momentum, and create a truly global, value-based Japanese biopharmaceutical leader. In particular, a transaction with Shire would:

· strengthen Takeda’s core therapeutic areas of oncology, GI and neuroscience

· accelerate Takeda’s vision to be a leader in specialized medicines that are transformative to patients through the addition of Shire’s leading global rare disease franchise

· further enhance Takeda’s robust R&D strategy, concentrating on key therapeutic areas

· reinforce a strong and large-molecule focused late-stage pipeline within Takeda’s core therapeutic areas to complement Takeda’s own pipeline and discovery capabilities

· balance Takeda’s geographic focus to align with the market opportunity in the U.S.

· drive financial value from a strong combined financial profile

Clearly defined strategic and financial objectives are core to Takeda’s disciplined approach to acquisitions, including in relation to its dividend policy and credit rating, which are well-established. Any potential offer for Shire, if made, would have to align with this strict investment criteria.

Back to Shire:

More from the CBI’s high street survey:

Shire shares - which climbed as high as £38.79 on news of the possible approach by Takeda - have come off their best levels.

The rather conditional nature of the Japanese statement means Shire is now at £35.45, still 15% better on the day.

Takeda says it is at a preliminary and exploratory stage in considering a bid, and no approach has been made to the Shire board.

Meanwhile Takeda - Japan’s biggest pharmaceutical company - is worth some £29bn. This is less than Shire’s value after today’s jump, but around the same as the UK-listed company was worth at last night’s closing price.

Shire is worth £35bn after its shares jumped to £38 on the news of Takeda’s possible approach.

The Easter break couldn’t have come at a worse time for stock markets, says David Morrison, senior market strategist at GKFX:

Investors were already on edge having been shocked by February’s equity sell-off triggered by the dual spike in volatility and bond yields. Despite a strong rebound, the major stock indices remain fragile with many in danger of breaking back below some major technical levels – in particular, the lower level of the S&P’s bullish trendline advance since February 2016. This has been brought sharply into focus with the sell-off in tech stocks, which have lead the market rally for so long, catalysed by the scandal surrounding Facebook’s cavalier attitude to its users’ data.

Now we have a long holiday weekend which coincides with the close of the first quarter. Once again, bonds are in focus – particularly the US 10-year Treasury. But this time yields have slumped with the 10-year crashing back below the key 2.80% level which has held as support for the past six weeks. Investors are piling back into the perceived “safe haven” of fixed income as stock markets slide...

And this comes against a backdrop of tighter monetary policy from the Federal Reserve, concerns over the outbreak of trade wars and worries about changes in key White House personnel leading to a more hawkish foreign policy. All-in-all, investors will see plenty of reasons to reduce equity exposure as we head into the weekend.

Markets could be in for a run of volatility similar to the summer of 2015, says Chris Beauchamp, chief market analyst at IG:

Markets remain under pressure as the sell-off in tech spreads once more to the wider equities space. The bounce on Tuesday looks like a flash in the pan, with more and more investors heading to the exit.

It is looking increasingly likely that we have a re-run of August 2015 on our hands; equities then had months of volatility to contend with before the rally resumed. With trade wars and the tech scandal weighing on sentiment we may well have more downside to content with...

The rout in global growth stocks has been seen in the falls in mining and bank names in London. Particularly hard hit among the banks are the Asia-focussed giants HSBC and Standard Chartered, while miners have seen further outflows as investors downgrade their optimistic views on global economic expansion.

Here’s an interesting chart on market bubbles:

Meanwhile the pound is edging higher, up 0.16% against the dollar at $1.4177 and 0.21% better against the euro at €1.1430. Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi, said:

The ongoing reduction in Brexit risks and more hawkish outlook for Bank of England policy are the key drivers behind the pound’s upward momentum.

The pound has derived some additional support from a report that Irish officials have been told to expect new plans “imminently” on how Britain plans to avoid a hard border with Northern Ireland. While short on details, the report has further boosted confidence that the UK and EU can find a workable and timely solution to the Irish border issue to support plans for a “smooth & orderly Brexit”. Nevertheless, it still remains a potential banana skin for the pound in the coming months if intensified Brexit talks do not progress as well as hoped.

More on the tech fallout, which saw the US FANG stocks have their worst day for more than two years. Naeem Aslam, chief market analyst at Think Markets, said:

The tech sector is predominantly getting battered, mainly due to the woes of Facebook’s data breach. We clearly have three kind of investors when it comes to the Facebook; firstly there are some who are jumping out of the ship, pushing the stock price lower. Secondly, we have investors who are watching the show from the sideline and thinking there is more pain to come as we do not know how big the potential fine could be. This is not helping the stock price either. Finally, we have those who are not interested in Facebook anymore as they think that the regulatory burdensome on Facebook is too risky for their appetite and they do not want to get involved in this stock.

We personally think, that Facebook has strong fundamentals and it has become the part of everyone’s daily life, so once we have a clear idea about the potential sum which the firm would have to pay as a result of this situation, the stock price could present a potential opportunity.

As for the FANG stock including Microsoft, Twitter, it is likely that the Facebook incident would open the door for more scrutiny for other firms, and lawmakers would see how other firms are using user data. This could really open the can of worms and open a potential opportunity for short sellers.

Here are IG’s opening calls for European markets: