Stocks Cautious Ahead of U.S. Fed Announcement
LONDON -- European equity markets are trading lower Thursday as many investors consolidate their positions and stand on the sidelines ahead of the U.S. Federal Reserve's announcement regarding its economic stimulus decision later today. This week's rally has offered a strong jumping-board from which to hold, and money has been flowing away from the higher-beta assets and into perceived safe havens; German bund yields hit record lows, and defensive stocks are holding strong.
With these moves, the German DAX (INDEX: ^GDAXI) is one of the best-performing benchmark indexes on the continent, down 0.3%.
As always, the following price moves are based on this morning's European trading.
French aviation company European Aeronautic, Defense and Space (OTC: EADSY.PK) and British defense firm BAE Systems (OTC: BAESY.PK) have been hitting the headlines today, both shares falling dramatically as news of their proposed merger received a skeptical and response. The move would be expected to create a $48 billion European defense and aerospace giant. The two companies aim to reach a decision by Oct. 10.
EADS and BAE hope this new firm would be able to rival U.S. giant Boeing, crafting everything from civil jets to nuclear submarines. BAE and EADS, owner of Airbus, have a number of investors -- including the U.K. and French government, respectively -- which could complicate any merger. The spokesman for the two companies said that any deal would result in shares being offered to the respective governments to replace their existing investment. BAE is currently down 7.5%, while EADS is down almost 9%.
Elsewhere, the move away from riskier assets today is causing banking and financial shares to fall, particularly in European peripheral countries, as profit-taking following recent outperformance hits prices. In Spain, Banco Santander (NYS: SAN) is suffering some of the strongest selling pressure, down almost 3% after it said yesterday that deposits in its Spanish business declined 6.3% in July to 152.9 billion euros.
Nokia (NYS: NOK) , meanwhile is down more than 2% following the launch of the new iPhone 5 yesterday. The company had pre-empted the launch with that of its own Lumia 920 and 820 smartphones last week, although the great reception and speculated demand for the latest iPhone now has many betting this will not be enough for the flagging company to get a hold on the highly competitive market.
As always, this morning's European news saw some winners and losers -- and perhaps some European buying opportunities. Indeed, legendary investor Warren Buffett has recently spent more than $1 billion buying the stock of a prominent European large cap.
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