UK stocks were on a fast track to nowhere on Wednesday. The FTSE 100 has been trading sideways in thin holiday markets.
Banks were top performers on the UK benchmark, with Barclays (LON:BARC), HSBC (LON:HSBA) and RBS (LON:RBS) amongst the top five risers whilst a drop in commodity prices weighed on mining shares. A report in a German newspaper that Deutsche Bank (DE:DBKGn) was considering a merger with rival Commerzbank (DE:CBKG) has raised the prospect of M&A amongst Europe’s biggest banks.
Deutsche Bank CEO John Cryan sent mixed messages about the prospect of a merger in comments on Wednesday. On the one side Cryan said his bank is concentrating on reducing its size, but also saying that mergers in the industry are needed for long-term profitability.
Any bank mergers, particularly between those with the same home market, would face serious competition concerns given the disastrous consequences of ill-thought out mergers in the lead-up to the financial crisis. The actions taken against Apple (NASDAQ:AAPL) in the last 24 hours in the name of competition concerns suggest the EU wouldn’t bat an eyelid about preventing mega bank mergers.
The strong performance of bank shares matches similar gains on Wall Street. Last week’s Jackson Hole conference has seen markets reassess the likelihood of US central bankers finally raising rates this year, a positive for bank profit margins.
A rise in the US dollar on renewed rate-hike calls has seen the price of gold, the euro and the Chinese yuan fall with positive effects for European and Chinese stock markets.
Shares in France and Germany were higher amid well-received earnings reports from Bouygues (PA:BOUY) and Iliad (MU:ILD).
Stocks in the US look set for a slightly lower open ahead of ADP unemployment data. US presidential candidate Donald Trump will visit the Mexican president, presumably to discuss building materials.
USA pre-opening levels
S&P 500: unchanged at 2,176
Dow Jones: 9 points lower at 18,445
Nasdaq 100: 1 point lower at 4,774
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