After a troublesome start to the week, shares edged higher on Wednesday. Sentiment continues to hinge of the movement in Deutsche Bank (LON:0H7D) shares. Early stabilisation from news that Deutsche Bank (DE:DBKGn) is selling assets to bolster the funds available to pay US regulatory fines was rocked by reports the German government was making “contingency plans” for the bank.
Reports have suggested that the German government could take a 25% stake in Deutsche Bank in an extreme scenario. This would constitute state aid and would be very tricky for the German government to pull-off, especially when it has poured scorn on similar efforts in Italy with Monte dei Paschi (MI:BMPS). Were Deutsche Bank to get a back-door bailout, it would set a huge precedent for the rest of the European banking sector, notably in Italy. In fairness, with one of its biggest lenders under pressure, it would be remiss for a sensible government not to form a contingency plan.
Miners were top risers on the FTSE 100. Shares of Anglo American (LON:AAL) and Rio Tinto (LON:RIO) jumped following the closure of mines in the Philippines which sent Nickel and other metals prices higher. Shares of Royal Bank of Scotland (LON:RBS) rose after the bank closed the door on another fine from the US by agreeing to pay $1.1bn.
Central bankers are out in force on Wednesday. ECB president Mario Draghi was giving a speech to German lawmakers in Berlin, the Bank of England’s Shafik was speaking in London and the Fed’s Janet Yellen and James Bullard are giving talks later. The Germans may be looking to vent about a risky and fairly unsuccessful monetary stimulus without an exit plan. Mr Draghi will likely push back, saying fiscal and structural changes are needed to replace monetary policy in spurring economic recovery.
Shares of UK Mail (LON:UKM) shot over 40% higher after the delivery firm agreed to a takeover by Deutsche Post (DE:DPWGn) for £242.7m at 440p a share. It’s an opportunistic buy for Deutsche Post, using a devalued pound and problems with UK Mail’s new sorting facility to expand its stake, beyond its ownership of DHL, in the UK delivery market.
Stagecoach (LON:SGC) shares reversed early losses after the bus and rail operator reported falling revenues but kept its full year guidance unchanged.
Stocks in the US look set for a lower start with an expected 4% decline in Nike (NYSE:NKE) shares after poorly-received earnings weighing on the Dow Jones ahead of a speech from Fed chair Janet Yellen.
USA pre-opening levels
S&P 500: 4 points lower at 2,155
Dow Jones: 22 points lower at 18,206
Nasdaq 100: 9 points lower at 4,857
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