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Stocks climbed as traders prepared for a week packed with interest-rate decisions from major central banks. A spurt of dealmaking news boosted sentiment in the equities market.
Consumer products and auto shares led the advance in Europe, while rising US futures pointed to modest gains later on Wall Street. A gauge of Asian stocks rose.
On the M&A front, Novartis AG agreed to buy Chinook Therapeutics Inc. for as much as US$3,5 billion to add two promising treatments for a rare kidney disease. Teck Resources said it’s engaging with Glencore’s offer to buy its steelmaking coal business for cash.
In other deals, Swiss industrial company Georg Fischer AG offered to acquire Finnish plumbing-equipment manufacturer Uponor. Mike Ashley’s Frasers Group bought a stake in online electronics retailer AO World, while Thyssenkrupp began a long-planned initial public offering of its Nucera hydrogen unit.
A busy calendar for investors kicks off with today’s US inflation report, on the eve of the Federal Reserve’s latest policy decision. Positioning in rates markets suggests one more Fed hike, with the likelihood that the move comes next month rather than tomorrow.
“The main focus this coming week will be on the US core CPI and thereafter the FOMC, where our economics team expects a ‘hawkish pause’ from the Fed,” Nomura Holdings analysts including Chetan Seth wrote in a note. With the market mostly pricing in a hike by July, they don’t see a negative impact for stocks beyond “any initial knee-jerk negative reaction.”
Energy stocks were the biggest laggards in European trading as oil extended losses amid persistent concerns around the demand outlook, with Goldman Sachs Group cutting its price forecast again.
Miners were also weaker after iron ore slumped almost 5 percent, falling for the first time in nine sessions because of worries about weakness in China’s property industry.
Treasury yields rose around two basis points for both the two-year and the 10-year maturities. A Bloomberg measure of the dollar was steady. The yen and the offshore yuan slipped about 0,1 percent versus the greenback.
While the consensus is for the Fed to pause this week, unexpected hikes last week from the Bank of Canada and the Reserve Bank of Australia have added an extra element of uncertainty to markets. The European Central Bank is projected to lift its benchmark rate Thursday and the Bank of Japan is expected to stand pat on Friday.
Add to that the concerns over growth in China.
“The Chinese economy is really a story of a crisis of confidence right now,” Meera Pandit, global market strategist at JPMorgan Asset Management, said on Bloomberg Radio. “We really need to see lawmakers and then policymakers infuse some sort of fiscal stimulus to help that confidence story.”
Bloomberg Economics is among a minority of forecasters that see the People’s Bank of China cutting its medium-term lending facility on Thursday. — Bloomberg.
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