Europe: Stoxx 600 ends flat as merger boost balances France turmoil

EUROPEAN shares ended steady on Tuesday, as a boost from Anglo American’s merger deal and higher oil prices managed to counter uncertainty in France after Prime Minister Francois Bayrou’s ouster in a confidence vote.

The pan-European Stoxx 600 ended 0.09 per cent higher at 552.39 points, with the basic resources index rising about 1.3 per cent.

Shares of Anglo American jumped 8.7 per cent after the miner said it had agreed to merge with Canada’s Teck Resources in a US$50 billion deal to form a newly combined company, Anglo Teck Plc. Fellow miner Glencore also surged 5.1 per cent in kind.

S&P revised its outlook on Anglo American to positive after the merger agreement.

Meanwhile, France’s CAC 40 index added 0.2 per cent, although market nervousness was more evident in the bond market as the premium investors demand to hold French 10-year debt over the benchmark 10-year German bund rose about 7 basis points.

The French government’s collapse has deepened a political crisis and forced President Emmanuel Macron to seek his fifth prime minister in less than two years.

The new premier will attempt to unite parliament to pass next year’s budget and make headway in slashing France’s budget deficit - the largest in the euro zone.

Losing the confidence vote, along with the accompanying fiscal uncertainty, pushes France closer to a ratings downgrade, with Fitch set to begin a series of credit reviews on Friday.

“There is a risk of a downgrade at the Sep 12 meeting...” said Kiran Ganesh, multi-asset strategist at UBS Global Wealth Management.

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“The immediate implication of the current situation for the French economy is through uncertainty, as individuals and businesses may be compelled to hold off on spending, investing or hiring until there is greater clarity on the political situation and some measures in the budget,” economists at Deutsche Bank Research said in a note.

The oil and gas sub-index jumped 1.3 per cent, providing the biggest boost to the main index, as it tracked a jump in oil prices after the Israeli military carried out an attack on the Hamas leadership in Qatar.

Financial services slid 0.9 per cent to lead sectoral losses, following a nearly 1.5 per cent climb in the previous session.

In Italy, Monte dei Paschi di Siena gained 6.3 per cent after data showed that the lender secured 62 per cent of bid target Mediobanca. Mediobanca’s shares climbed 5.9 per cent.

Swiss pharma giant Novartis slipped 0.2 per cent after saying it would acquire Tourmaline Bio in a deal valuing the New York-based biopharmaceutical company at US$1.4 billion on a fully diluted basis.

The sub-index for media companies jumped 1 per cent, boosted by Universal Music Group’s 2.1 per cent rise after Citigroup upgraded the stock to “Buy” from “Neutral”.

Saab slid 2.4 per cent to the bottom of the benchmark index after Barclays initiated coverage on the defence equipment maker with an “underweight” rating, less than a week after Morgan Stanley started coverage with a similar rating.

Later this week, investors will shift their attention to an interest rate decision from the European Central Bank and inflation data from the United States. REUTERS