European stocks fell Wednesday, ending the last day of August with energy stocks hurt as the oil market sold off, but a report that Deutsche Bank AG and Commerzbank AG held merger talks sent shares of the German lending heavyweights higher.
The Stoxx Europe 600 index
fell 0.4% to 343.53 in a choppy session that left only the financial
sectors higher. The Stoxx 600 wrapped up the month with a gain of 0.5%, a second consecutive monthly rise.
Tie-up talks: The financial sector rose as Commerzbank
leapt 3.4% and Deutsche Bank
picked up 2.5%. That came after a German magazine reported the two held early talks about a possible merger. Both banks refused to comment on the report.
Executives at the lenders did discuss a potential merger over a two-week period this month, but last week determined that it wasn’t a viable option, according to The Wall Street Journal, citing people briefed on the talks.
“Deutsche is a very juicy takeover target, in part as “its shares are now worth a tenth what they were in 2007,” said Neil Wilson, markets analyst at ETX Capital, in a note.
Consolidation in the industry “is coming in some form. Technology and regulation costs are rising and margins are being squeezed by persistently low and negative interest rates. Trading revenues are also on the decline. In any industry this would be a sign that deals are imminent,” said Wilson.
While the German bank shares gained, the DAX 30
in Frankfurt ended lower by 0.6% at 10,592.69. The index still ended August with a 2.5% gain.
Energy fizzles: But the oil and gas group
fell by the most as oil futures veered toward three-week lows. That slump came after a U.S. government report showed a bigger-than-expected weekly increase in crude inventories, adding to already persistent concerns about global oversupply.
As European equity trading closed, West Texas Intermediate oil
dropped more than 3% to trade below $45 a barrel, while Brent crude
slumped nearly 3% to trade around $47 a barrel.
Eurozone inflation: A preliminary measure of consumer-price inflation came in below expectations in August at an annual rate of 0.2%, far from the European Central Bank’s target of near but just below 2%. That was below expectations of a 0.3% rate.
The data “seems to have given a bit more credence to reports that the ECB will reveal [some] kind of stimulus extension next week,” wrote Connor Campbell, financial analyst at Spreadex. “That logic explains the euro’s weakened showing against the pound, while also causing the DAX to lift away from its lows,” he added.
bought 84.93 pence, down from 85.19 pence late Tuesday. But against the dollar
the shared currency eventually turned higher, trading at $1.1160, compared with $1.1140 late Tuesday.
ECB policy makers will meet on Sept. 8.
Data docket: German jobless claims fell further in August and the jobless rate stayed at a record low, official data showed Wednesday. Meanwhile, German retail sales growth reached a multiyear high in July with a rise of 1.7%.
U.K. consumer sentiment saw some recovery in August after suffering its steepest fall in more than two decades after the Brexit vote, GfK found. In the same month, house-price growth picked up slightly, a British lender’s data showed, despite other signs the housing market may have cooled after the June 23 referendum.
French telecom company Iliad SA
leapt 4.4% as first-half earnings before interest, taxes, depreciation and amortization, or Ebitda, rose by 12% to €808.5 million, slightly above forecasts from analysts polled by FactSet.
Grafton Group PLC
tumbled 9.95% as the building materials company said after weak trading in June, demand in its U.K. merchants business “was relatively flat during July and August with markets remaining very price competitive.”
EU Apple tax ruling turns spotlight on multinationals
Besides Apple, European Union regulators have been scrutinizing the tax arrangements between its member countries and several U.S. companies such as Amazon, Google and McDonald’s.