European stocks edge higher on Yellen’s hawkish tone

Big 5

European stock markets moved higher Wednesday amid some major corporate news and on growing expectations of another rate hike in the United States before year-end.

The pan-European Stoxx 600 was 0.26 percent higher with most sectors trading in positive territory. Banking stocks were outperforming its peers in late-morning trade on the latest comments from Janet Yellen, the chair of the U.S. Federal Reserve.

She said Tuesday that it would be “imprudent” to keep monetary policy on hold waiting for inflation to reach 2 percent and that moving “too gradually” could be risky. The U.S. dollar and bond yields also jumped Wednesday on such remarks. Banks traditionally perform better in a environment with higher yields.

Merger news

Alstom shares rose to the top of the European benchmark following confirmation that the French firm will merge with Siemens. The former was up by more than 5 percent. The companies will merge their rail operations and have decided to make Alstom’s Henri Poupart-Lafarge their chief executive.

France’s Finance Minister Bruno Le Maire said Wednesday morning that he hoped a similar deal would take place in the naval industry. France and Italian policymakers are gathering in Lyon to potentially reach a deal over the STX shipyards.

Meanwhile, Finnish power utility Fortum is set to launch a takeover bid for Uniper totaling 8.05 billion euros ($9.5 billion), Reuters reported. The former was sightly higher in late morning deals.

The retailer Ica Gruppen was at the bottom of the benchmark, down by 4 percent, after a rating downgrade from SEB bank.

Macron wants a global economic power in the euro zone

Overall, market sentiment was dominated by monetary policy, given that geopolitical tensions over North Korea seemed to have scaled back slightly. U.S. President Donald Trump said Tuesday that a military option for North Korea isn’t the preferred choice but if this were to be the case, it would be “devastating” for Pyongyang. Asian investors trod cautiously overnight as a result.

In Europe, French President Emmanuel Macron presented key proposals to move forward with European integration. The former investment banker showed a clear and ambitious vision for the European Union, calling for a euro zone that is the “heart of Europe’s global economic power.”

In the U.K. the Bank of England said that it is expecting 130 financial firms from Europe to ask for a license to operate in the Britain once it officially leaves the European Union, Reuters reported.

Data out Wednesday morning showed French consumer confidence falling slightly in September from the previous month.

“Overall, these data tell a clear story that uncertainty for households are increasing as Mr. Macron moves to implement a swathe of changes to the labor market as well as tax reform,” Claus Vistesen, chief euro zone economist at Pantheon Macroeconomics, said in an email.

Source: CNBC