The focus was on Europe yesterday as the European Central Bank (ECB) council met to discuss interest rates. To no one's surprise, the ECB actioned a 25-basis-point cut, taking rates in the eurozone to 3.5%. ECB president Christine Lagarde said that the decision to cut had been unanimous and swayed by the path of inflation, which the ECB wants to see fall to 2%. At 2.2%, it is well on the way to that target.
European banks were in focus in yesterday's trading and not just because of the rates. Italy’s Unicredit acquired a 4.5% stake in Germany's Commerzbank, prompting speculation from analysts at JPMorgan and others about a potential round of mergers and acquisitions among European lenders and financials.
Recent European banking mergers have happened as acts of necessity rather than opportunity. However, JPMorgan seems to think that circumstances are different this time and has upgraded Commerzbank, ABN Amro and BAMI, all of which it considers to be potential takeover targets.
The Euro Stoxx 50 added 1.1% on Thursday. Among the biggest gainers in the index were ASML which was up 3.5%, Safran which added 3.2%, Inditex which added another 3% and Schneider Electric which rallied by 2.8%. The biggest faller on the day was Italian bank Intesa Sanpaolo, which fell by 2.1%.
In US trading, gold ETFs stood out in an otherwise quiet session. The Vaneck Junior Gold Miners [GDXJ] ETF added 6.63% on the session while its stable mate VanEck Gold Miners [GDX], which tracks the larger gold miners, was up by 4.87%, and both ETFs had traded higher in the session. GDXJ also traded more than twice its daily average volume. What was particularly notable was that spot gold was only up by 1.87% on Thursday, and by 2.74% over the last week.
Aircraft manufacturer Boeing was back in the news for the wrong reasons once more, as the firm’s US workers voted to strike, despite the offer of a 25% pay rise, which unions had tentatively accepted. Boeing’s stock price has lost 37.55% year-to-date and the company remains under the scrutiny of the US aviation authorities. Counterintuitively, the stock finished up on the day by 0.89%.
Supermarket chain Kroger rallied by 7.18% on an earnings beat and improved guidance. US retail is becoming increasingly polarised, with outright winners and losers, but little in the middle ground. However, some sectors remain somewhat unloved in the short term, including consumer staples, financials and energy.
European equity markets opened higher this morning. The DAX is up by 0.49%, as is the CAC 40. The IBEX 35 has gained 0.51%, while London’s FTSE is lagging, only up by 0.18%. WTI crude oil is trading up by 0.57%, and Brent is up by 0.47%. Gold has added 0.29%, while silver is up 0.41%. US 10-year bond yields continue to slip and stand at 3.653%, while the dollar index is unchanged.
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