European Banks Gain on Merger Speculation; Burberry, Sonova Fall

Lucy Stoeva
18 May, 2016
New York City

Trading in Europe was volatile on Wednesday, but markets staged a late rebound. Burberry fell 2.2% after reporting an 8% drop in profit. Sonova tumbled 6.8% after the Swiss hearing aid maker missed its full-year sales and profit targets.

[R]4:00 PM Frankfurt, Germany – Trading in Europe was volatile on Wednesday, but markets staged a late rebound. Burberry fell 2.2% after reporting an 8% drop in profit. Sonova tumbled 6.8% after the Swiss hearing aid maker missed its full-year sales and profit targets.[/R]

Trading in Europe remained volatile on Wednesday, but markets staged a late rebound as gains in bank stocks offset mining losses and weak corporate earnings.

Bank shares rose news and speculations about potential mergers and acquisitions.

In Italy, gains were fueled by rumors about consolidation among of some of the smaller lenders.

Banca popolare dell''Emilia Romagna surged 6.1%, Banca Monte dei Paschi di Siena climbed 1.8%, Mediobanca Banca di Credito Finanziario rose 1.7%, Banca Popolare di Milano rose 1.6%, and FinecoBank added 1.2%,

In Portugal, Banco BPI rose 2.4% to €1.14, or higher than the price offered by Spanish bank Caixabank late on Tuesday.

In the U.K., Lloyds rose 3% and the Royal Bank of Scotland surged 4.1% on speculation that the UK government may sell off its share in the two lenders.

In Greece, Alpha Bank surged 4.4%.

On the downside, Sonova Holding tumbled 6.8% after the Swiss hearing aid maker missed its full-year sales and profit targets.

Luxury fashion desigmer Burberry fell 2.2% after reporting an 8% drop in profit and steering expectations towards the lower end of the range.

The U.S. dollar rose 0.3% against the euro to €0.8867 after two Federal Reserve officials said the central bank may consider raising interest rates at its June meeting.

Mining shares declined in response as a strong dollar makes commodity prices less attractive. Anglo American tumbled 4.3%, Antofagasta lost 3.3%, Glencore shed 3%, and BHP Billiton erased 2.5%.

In economic news, consumer prices in the euro zone fell 0.2% in April, signaling deflation for a second month this year, according to preliminary Eurostat estimates.

The data showed that inflation remains under the target of 2% set by the European Central Bank. The core rate of inflation, excluding food and energy, fell to 0.7% from 1% in March, the lowest level in a year.

In London, the FTSE 100 index inched down 1.97, or 0.03% to 6,165.80, while in Frankfurt, the DAX index gained 53.04, or 0.54%, to 9,943.23.