Unilever Dents Europe Stock Advance as Pound Rises: Markets Wrap

(Bloomberg) -- European stocks pared an advance as a slump in Unilever NV largely offset gains across most industries. The pound recouped some of Friday’s losses as Britain’s House of Lords debated Brexit.

Equities in the world’s biggest single market climbed as much as 0.5 percent before flagging as Unilever declined on the withdrawal of Kraft Heinz Co.’s $143 billion takeover bid. The pound headed for biggest advance in more than two weeks against the dollar. Oil advanced for a third day and spot gold rose for the fourth session in five.

With U.S. bond and stock markets shut on Monday for Presidents’ Day, investors focused on developments in Europe. Political risk is in focus after a poll showed public approval for German Chancellor Angela Merkel’s ruling party fell behind the Social Democrats for the first time under her leadership. And in the U.K., some members of the parliament’s upper chamber will seek changes to the draft law that will allow the government to trigger a departure from the EU when it is discussed by the Lords.

Trading in Kraft and its erstwhile target are also on the radar after Friday’s surge in both stocks. People familiar with the talks at the weekend said 3G Capital and Warren Buffett’s Berkshire Hathaway Inc. decided Unilever’s negative response made a friendly transaction impossible.

“There’s an acceleration in M&A activity given the improved economic outlook and while stocks still trade at low multiples,” said Benjamin Philippe, fund manager at Degroof Petercam Gestion in Paris. “It’s spreading to a number of sectors including food, with Unilever in the spotlight as well as telecoms, where there’s potential for further consolidation.”

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Here’s what’s ahead for markets:

• The Fed releases minutes this week from its most recent meeting, possibly giving investors a look into how members see Trump’s policies. Data should show the U.S. housing market perking up a bit at the start of the year. The PMI is expected to rise slightly.
• PMI surveys for the euro area and its two largest economies this week may show growth momentum is solid, while the Ifo business confidence survey may support that view for Germany.
• Investors will be watching International Petroleum Week in London with top OPEC, government and company officials attending.
• Among companies reporting earnings this week are Wal-Mart Stores Inc., Barclays Plc and HSBC Holdings Plc. Billionaire Warren Buffett will release his annual letter to shareholders with Berkshire Hathaway Inc.’s earnings.
• The U.K.’s House of Lords is debating the article 50 bill, the legislation which will allow Theresa May to trigger Brexit.
• Bank of England Governor Mark Carney will on Tuesday testify before the U.K. Parliament’s Treasury Committee.

Here are the main moves in markets:

Stocks

• Stoxx Europe 600 Index closed 0.2 percent higher; telecommunication companies outperformed led by Deutsche Telekom AG following a rally in T-Mobile shares on Friday.
• Shares in Unilever fell 5.1 percent; the stock remains above its trading level before Kraft’s offer.
• Japan’s Topix rose for the first time in three days, reversing an early loss after the dollar strengthened on a Fed official’s comments. Hong Kong shares resumed a rally, closing at the highest since August 2015.

Currencies

• The Bloomberg Dollar Spot Index swung between gains and losses on Monday and was 0.1 percent lower as of 4 p.m. in New York. 
• The yen slid 0.2 percent to 113.11 per dollar.
• Sterling was higher versus all its Group-of-10 peers, rising 0.4 percent to $1.2459.
• The ruble gained 0.8 percent, and the Chilean peso 0.6 percent, as oil and copper rose.

Commodities

• Zinc climbed 2.7 percent to $2,884 a ton, leading an advance in base metals. Copper rose 1.7 percent to $2.765 a pound as a deadlock between Freeport-McMoRan Inc. and Indonesia over mining licenses, while Citigroup gave a bullish outlook for prices.
• U.S. oil futures climbed 0.5 percent to $53.69 a barrel after spending last week in the narrowest trading range in 13 years, as rising U.S. drilling activity threatened to offset OPEC production cuts.
• Spot gold climbed 0.3 percent to $1,238.14 an ounce after gaining three straight weeks.

Bonds

• German bonds were little changed, with 10-year yields at 0.3 percent.
• European government bond yield curves all steepened, as longer-dated bonds underperformed on expectations of long-dated syndicated bond sales this week.

--With assistance from James Herron Paul Jarvis David Goodman Blaise Robinson Vassilis Karamanis Neil Denslow Simon Ballard Robert Brand Stephen Spratt Adam Haigh and Paul Dobson

To contact the reporters on this story: Blaise Robinson in Paris at brobinson58@bloomberg.net, Eddie van der Walt in London at evanderwalt@bloomberg.net.

To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Robert Brand