Wall Street benchmarks yet again hurt by Apple

As trading progressed, the pan-European Stoxx 600 gave up on part of the gains made during morning European trading, though it remained in the green and not far below the two-month high it recorded earlier in the day. It was last up by a bit less than 0.2%.

Spain’s IBEX 35 remained the worst performing major benchmark in the continent, being last down by 0.6%. Caixabank, which was down by 3.0% and topped the list of decliners within the Stoxx 600 Banks, was also the Spanish blue-chip index’s worst performing stock. Spanish equities are being weighed by uncertainty over Catalonia’s campaign for independence. Still, year-to-date, IBEX 35 is up by 9.5%.

The FTSE 100 and CAC 40 both traded down by 0.3%, while the DAX was up by 0.1% on a day when politics was on investors’ mind. Angela Merkel will serve as chancellor for a fourth term but her party was weakened and a far-right party has entered the parliament for the first time since the 1940s. Political uncertainty in Eurozone countries, which had seemed to be fading after election outcomes in the Netherlands and France earlier in the year, is today back on the table to some extent.

Financials (down 0.6%) was the worst performing sector within the Stoxx 600 and energy and utilities (both up by 0.5%) the best performing ones.

In M&A activity and according to sources as there have been no official releases yet by the companies involved, Siemens (up 0.2%), the German industrial manufacturing company, is likely to select French rival Alstom (up 0.05%) over Canada’s Bombardier (down 2.7%) when it decides tomorrow on a multibillion dollar rail merger. Bombardier, which trades on the Toronto Stock Exchange, declined considerably on Friday on reports Siemens was in advanced discussions with Alstom. Contrasting this, Alstom gained considerably last week on speculation about the deal, while today it hit 33.70 euros at its highest, this being a four-and-a-half-year peak for the company’s stock price.

Remaining within M&A, Swedish-Swiss engineering company ABB (up 0.5%) announced it was acquiring GE’s Industrial Solutions unit. Unilever (down 0.1%) announced it would proceed with the purchase of cosmetics firm Carver Korea. UniCredit and Commerzbank were down by 0.9% and 1.5% respectively. The former’s deputy chairman said on Friday that market talk over the Italian bank wanting to acquire Commerzbank was nonsense.

The Nordic-based payment service provider Nets A/S remained the Stoxx 600’s best performing stock, being last up by 6.4%. The company received a 33.1 billion Danish krone ($5.3bn) takeover bid by US private equity firm Hellman & Friedman. Should the deal materialize, it would constitute one of the largest European private equity buyouts in years. In similar fashion but on the other side of the spectrum, NCC AB, being last down by 8.0%, remained the Stoxx 600’s worst performing stock. The Swedish construction company issued a profit warning, expecting Q3 operating profits to come in far below analysts’ forecasts.

Just minutes after the opening bell, the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 were all down by 0.1%, 0.1% and 0.6% respectively. Apple (down 1.2%) remains on a declining path, weighing on all three indices. It today hit a fresh two-month low. Demand for the tech giant’s iPhone 8 is not as strong as previous models as consumers are likely waiting for the launch of iPhone X.

General Motors (up 2.3%) will also be in focus during US trading after the vehicle maker’s stock was upgraded to “buy” by Deutsche Bank.

In commenting today, New York Fed President William Dudley today supported the case for the Federal Reserve to remain on a path of gradual interest rate increases. Among other Fed speakers, Fed Chair Janet Yellen will be talking tomorrow at the 59th Annual Meeting of the National Association for Business Economics.

by Andreas Georgiou, XM Investment Research Desk

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