EUROPE MARKETS: European Stocks Reach For Fresh 2-year Highs As Spanish, Greek Shares Climb
|01/22/2018 | 11:12am|
By Carla Mozee, MarketWatch
Sanofi buying biotech firm for $11.6 billion
Europeans stocks pushed higher Monday, with Spanish and Greek shares gaining in the wake of sovereign ratings upgrades, but decliners included British bookmakers and UBS AG after the Swiss lender swung to a quarterly loss.
What are stocks doing?: The Stoxx Europe 600 index was up 0.3% to 402.03, hanging around its highest since August 2015, with telecom and oil and gas shares among advancers. But tech and basic materials shares fronted decliners. Last week, the pan-European gauge rose for a third consecutive week.
Leading major benchmarks was Spain's IBEX 35 as it picked up 1.1% to 10,596.40, moving at levels not seen since September. Greece's Athex Composite surged 1.3% to 858.12, around its highest since July.
Germany's DAX 30 index was up 0.2% at 13,454.76, following Friday's 1.2% rally that left the gauge at its highest close since November. France's CAC 40 moved up 0.2% to 5,536.90.
The U.K.'s FTSE 100 index was down 0.1% at 7,721.65.
The euro bought $1.2254, up from $1.2220 late Friday in New York.
What's driving markets: Benchmark indexes in Spain and Greece were standouts, bulking up more than 1% each as investors rewarded ratings upgrades for the countries, issued late Friday. Spain's credit rating was raised by Fitch Ratings, which cited the country's "strong, relatively broad-based, economic recovery" as reason for the upgrade to A- from BBB+. The last time Spain held a Fitch rating in the "A" level was in 2012.
Greece's rating at S&P Global Ratings was raised to B from B-, with a positive outlook. "The upgrade reflects Greece's steadily improving general government finances and its gradually recovering economic prospects," wrote S&P. "Still, the size of Greece's general government debt is an important ratings constraint," it added.
Meanwhile, politics remained firmly in the spotlight as investors also juggled a fresh round of corporate financial updates, including M&A news. The euro advanced against the U.S. dollar as the U.S. government remained in shutdown mode. Saturday's closure came after the Republican-led Senate late Friday couldn't reach a deal over immigration issues.
Euro strength can hurt sales of products made by European exporters and hurt shares of those companies.
The euro had been choppy earlier after members of Germany's center-left Social Democratic Party on Sunday voted to formally begin coalition talks with German Chancellor Angela Merkel's conservative party. Merkel has been trying to craft a ruling coalition since September's election.
From the corporate front, UBS said it will take a roughly charge of nearly 3 billion Swiss francs stemming from the U.S. tax overhaul. Shares of the firm fell Monday.
On tap this week is the European Central Bank's meeting on Thursday. The euro in recent sessions has been kicked up to 3-year highs versus the greenback on the prospect the central bank will soon shift to a hawkish tone toward its ultra-loose monetary policy.
What strategists are saying: "Given that only 56% of the SPD's voted in favor of the talks, the rejection of a final coalition deal remains a risk that's likely to keep the euro capped for now," said Hussein Sayed, chief market strategist at FXTM, in a note.
"The pressure on Democratic and Republican leaders to end the stand-off is intense, so market participants are watching for any sign cracks in Democrats' resolve on immigration status for 'Dreamers'. The deal on the table is only a 'stop gap' though. It will fund spending till early February. That means a breakthrough could be treated as hollow by markets," said Ken Odeluga, market analyst, at City Index, in a note.
M&A deals: Sanofi SA (>> Sanofi) fell 2.9% after the French pharmaceuticals maker said it will acquire Bioverativ Inc .(>> Bioverativ Inc) for $11.6 billion. Bioverativ focused on therapies for hemophilia and other rare blood disorders.
Compagnie Financière Richemont SA (>> Compagnie Financière Richemont) was down 1.9% after the luxury-goods company being Cartier and Montblanc said it's spending up to EUR2.69 billion ($3.3 billion) to buy shares in e-commerce firm Yoox Net-a-Porter (>> Yoox Net-A-Porter Group) that it doesn't already own. Shares of Milan-based Yoox leapt 24%.
Stock movers: Ocado Group PLC (>> Ocado Group PLC) rallied 30%, with the company saying it will develop an online-grocery business for Canadian food retailer Sobeys Inc .
William Hill PLC (>> William Hill) tumbled 12%, falling alongside other bookmakers after a Sunday Times report (https://www.thetimes.co.uk/article/2-limit-to-curb-crack-cocaine-of-gambling-ftc6v37hr) that the U.K. government is set to limit the stake on betting shop terminals to GBP2, down from GBP100, in an effort to curb gambling problems.
"Gambling companies have made hundreds of millions of pounds a year from fixed odds betting terminals and were hoping that the minimum stake would be towards the middle of the GBP2 and GBP50 consultation range," said Rebecca O'Keeffe, head of investment at Interactive Investor, in a note.
Shares of Paddy Power Betfair PLC was off 1%.
UBS (>> UBS Group) fell 0.3% after the Swiss bank swung to a fourth-quarter net loss of 2.22 billion francs ($2.3 billion) , slightly larger than a net loss of 2.15 billion francs expected by analysts. The swing was led by a write-down of roughly 2.9 billion francs ($3.01 billion) of deferred tax assets stemming from tax reforms in the U.S. UBS did say it would launch a 2 billion franc share buyback program over three years, beginning in March.
Barclays PLC (>> Barclays PLC) rose 4% following a Financial Times report (https://www.ft.com/content/e768ce1e-fd54-11e7-9b32-d7d59aace167) that U.S. hedge fund Tiger Global has invested more than GBP1 billion in the London-based lender.
In Madrid trade, Siemens Gamesa Renewable Energy SA (>> Siemens Gamesa Renewable Energy) tacked on 3%, saying a series of contracts it's signed in India signals a turnaround in the market after several months of weakness.