Fed and $50 billion auto merger plan temper share price pullback
World shares slipped off 21-month highs on Wednesday as the prospect of a U.S. rate cut was offset by reports a Sino-U.S. trade deal may be delayed, though a possible $50 billion merger between Fiat-Chrysler and PSA capped European losses.
Sentiment has also been dented by weak earnings from a swathe of companies ranging from European banking giant Deutsche to tech titan Google, and by renewed uncertainty in Britain, which is set to hold a parliamentary election on Dec. 12.
After falls of around 0.5% on Asian bourses MIAPJ0000PUS .N225 .CSI300, Europe's pan-European equity benchmark was trading near flat%. But European auto shares .SXAP rose 0.7% and shares in Fiat Chrysler (FCHA.MI) and French PSA (PEUP.PA) jumped 7-8% on news they were in talks for a merger valued at as much as $50 billion
Broader sentiment was undermined however by a Reuters report quoting a U.S. official as saying an interim trade agreement between Washington and Beijing might not be completed in time for signing next month.
That hit Europe’s trade-sensitive tech .SX8P and commodity shares .SXPP and MSCI’s world equity index .MIWD00000PUS edged down after five successive sessions in the black.
Michael Hewson, chief market strategist at CMC Markets, said the deal news had not sharply lifted shares because regulatory hurdles remain, not least the French government’s stake in PSA.
“We’ve seen a lot of companies exploring M&A and I struggle to understand why this deal in particular is any more probable than the one with Renault,” he said, said referring to Fiat’s failed attempt to acquire another French carmaker.
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