European stocks fell Stocks fell Wednesday as investor sentiment was dampened by fears over economic growth prospects while the future of stimulus measures remains up in the air.
Investors are selling out of European stocks ahead of Thursday's ECB meeting, because of rising expectations that policy makers will discuss scaling back asset purchases, according to Antonio Cavarero, head of investments at Generali Investments.
"The trigger comes from the soon-to-be slow process of tapering," Mr. Cavarero said. "It is right for the ECB to start talking about tapering. It is appropriate for them to take some support away, but they will fine-tune and bring it to lower levels."
Shares of Kadmon jumped 75% after French pharmaceutical group Sanofi said it has entered into a definitive agreement to buy the U.S.-based biopharmaceutical company. Kadmon stock holders will receive $9.50 a share in cash, representing a total equity value of about $1.9 billion on a fully diluted basis.
Stock futures edged down on investors' concerns that Covid-19 cases remain elevated and uncertainty about when central banks may dial back easy-money policies.
Stocks have lost steam in recent days as investors assessed the rise in coronavirus cases and a weaker-than-expected jobs report on Friday. Money managers are awaiting fresh cues from the Federal Reserve and the European Central Bank about how signs of a slowing economic recovery and high inflation levels may influence their plans to taper monetary stimulus.
"This is about being more cautious on the growth prospects of the U.S. economy. People are rebalancing their growth outlooks," said Carsten Brzeski, global head of macro research at ING. "The sheer evidence that this could happen, that we will not see endlessly accelerating growth numbers, leads to some repricing and some selling."
The Fed is due to release a report known as the Beige Book at 2 p.m. ET, offering an assessment of the current state of the economy.
The dollar rises as investors flock to safe-haven assets on concerns about the global economic impact of rising coronavirus cases and about many central banks withdrawing stimulus.
"The spread of the Delta variant keeps clouding the outlook for the global economy while rising inflation is forcing many central banks to step in with monetary normalisation/tightening," ING analysts said.
This translates into a stronger dollar and weaker commodity currencies, they said.
The DXY dollar index rose 0.2% to a one-week high of 92.7090.
Bitcoin extended its drop, falling nearly 5% from its 5 p.m. ET level on Tuesday, to trade below $45,000 apiece. It plunged as much as 17% on Tuesday.
The euro is likely to trade in small ranges against the dollar ahead of the European Central Bank's policy decision Thursday, said UniCredit.
Analysts at the Italian bank don't expect heavy reactions Wednesday, which indicates "range trading is set to predominate again."
In their view, EUR/USD is unlikely to test the 1.18 level and "investors will likely wait for the ECB meeting tomorrow to take fresh positions," they said.
The ECB is likely to push back on speculation that it will taper its pandemic bond-buying program at Thursday's policy meeting, which would weaken the euro, ING said.
"Recent price action suggests that the market has turned slightly more hawkish on the ECB, all to the benefit of the euro," ING analysts said.
"However, we doubt that the ECB will provide any hawkish hints through tapering (front-loading of purchases should remain in place, in our view) or through the inflation forecasts," they said.
ING expects the ECB to maintain its policies and keep inflation forecasts for 2022 and 2023 broadly unchanged.
The yield on the benchmark 10-year Treasury note ticked down to 1.346%, from 1.370% on Tuesday.
Morgan Stanley Wealth Management expects the U.S. Treasury yield curve to steepen as it anticipates the Covid Delta variant to peak this week in the U.S., allowing for improvement in consumer confidence.
"If we are correct, the yield curve should steepen, presaging higher long-term interest rates," it said.
Historically, changes in the two-year to 10-year U.S. Treasury yield curve have tracked almost perfectly with the direction of consumer confidence, "which itself has been signaled by the difference between the present situation and expectations surveys," it said.
Morgan Stanley WM expects the recent fall in the direction of confidence as temporary, reflecting the distressing dynamics around the Covid Delta variant.
Brent crude oil was up, with both benchmarks paring some of their mild Tuesday losses that came as the dollar strengthened.
Those gentle gains come as the recovery in Gulf of Mexico production remains slow, DNB Markets' Helge Andre Martinsen said.
Some 79% of total U.S. offshore Gulf of Mexico production remains offline, according to the Bureau of Safety and Environmental Enforcement.
Investors are also watching out for API weekly inventory data, due out a day late on Wednesday, which should reflect the recent outages, ING's Warren Patterson said.
Gold prices ticked higher as investors await the conclusion of the ECB's meeting Thursday for clues on the central bank's tapering plans.
Gold has failed to benefit from expectations that the Fed will delay its plans to taper, said Ole Hansen, head of commodity strategy at Saxo Bank.
The decent performance of stock markets is one reason for this, while a higher dollar has also been diminishing gold's appeal, he said.
"The continued strength in global stocks reduces the need for diversification," he said.
With growth peaking and central banks likely to keep interest rates low for some time, gold's long-term prospects are still positive, he said. But for now "there is no reason to chase the market," Hansen said.
Sanofi to Acquire U.S. Biopharmaceutical Company Kadmon
French pharmaceutical major Sanofi SA said Wednesday that it has entered into a definitive agreement to acquire U.S.-based biopharmaceutical company Kadmon Holdings Inc.
Sanofi said that holders of Kadmon common stock will receive $9.50 a share in cash, representing a total equity value of about $1.9 billion on a fully diluted basis.
BHP, Bill Gates-Backed KoBold Metals Form Exploration Alliance
BHP Group Ltd., the world's largest miner by market value, has formed an exploration alliance with KoBold Metals, a Silicon Valley startup backed by Bill Gates-led Breakthrough Energy Ventures, the companies said on Wednesday.
KoBold, which is focused on using artificial intelligence to find new sources of electric-vehicle and renewable-energy metals, will initially partner with BHP to search for commodities such as nickel and copper in Western Australia before expanding to other places, the companies said. BHP and KoBold will jointly operate and fund exploration programs.
Morrisons in Talks Over Potential Auction to Resolve Bidding War
Wm. Morrison Supermarkets PLC said Wednesday that it is in talks over a possible auction to resolve a competitive situation between Clayton Dubilier & Rice LLC and a consortium led by Fortress Investment Group LLC.
The U.K. grocer said that given neither Fortress's offer of 272 pence ($3.75) a share nor CD&R's offer of 285 pence a share for the company has been declared final, and can both be further increased or otherwise revised, a competitive situation continues to exist.
Smiths Group Agrees to ICU Medical's Offer for Smiths Medical
Smiths Group PLC said Wednesday that its board has withdrawn its recommendation of the deal entered with TA Associates LLP for the sale of Smiths Medical as it has now agreed to sell it to ICU Medical, Inc. on better terms.
The engineering company said the ICU transaction delivers $400 million more value to shareholders than the TA Associates transaction.
Credit Suisse Names New Chief Compliance Officer, Head of Human Resources
Credit Suisse Group AG said Wednesday it has appointed a new chief compliance officer and a new global head of human resources to the executive board.
The Swiss bank said Rafael Lopez Lorenzo was named chief compliance officer, succeeding Thomas Grotzer.
Adecco Raises More Than EUR200 Mln for Acquisition of Akka
Adecco Group AG said Wednesday that it has raised about 232.29 million euros ($275.1 million) through a capital increase to fund its planned acquisition of Akka Technologies SE.
The Swiss human-resource company said the capital increase took place through the placement of 5.1 million shares at a price of 49.60 Swiss francs ($53.94) per new share.
Pirelli CFO Resigns
Pirelli & C. SpA said late Tuesday that Chief Financial Officer Francesco Tanzi has resigned to pursue a new professional experience.
The resignation is effective Dec. 31.
Salvatore Ferragamo Swung to Profit in 1H
Salvatore Ferragamo SpA on Tuesday said that it swung to profit in the first half of the year, while revenue increased despite the presence of restrictions and lockdown measures in some countries.
The Italian fashion house said it registered a net profit of 30.7 million euros ($36.4 million) in the period ended June 30, compared with a loss of EUR81.9 million in the year earlier.
Iran Blocking IAEA Access to Nuclear-Related Sites
Iran is refusing to allow inspectors access to nuclear-related sites and hindering a probe by the United Nations atomic agency while continuing to expand its nuclear activities, the International Atomic Energy Agency said in two confidential reports Tuesday, casting doubt on efforts to revive the 2015 nuclear deal.
The reports leave the Biden administration and its European allies facing a choice between pushing for a formal rebuke of Iran-which Tehran's new hard-line government has warned could scuttle the resumption of nuclear talks-or refraining from action, potentially undercutting the authority of the IAEA and its leadership.
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