European stocks ground out a tiny gain on Monday, as a pair of big merger reports and a weak pound sent London’s FTSE 100 higher, while defensive plays dominated other major markets ahead of Wednesday’s US Federal Reserve policy decision.
Shares in London Stock Exchange Group itself surged 15.3% to an all-time high, the bourse operator’s strongest one-day performance as a company since late 2008 after it said it was in discussions to buy Refinitiv Holdings for $27 billion, including debt.
That, along with a 22.7% jump for Just Eat shares after rival online food delivery firm Takeaway.com agreed to buy the company in an 8.2-billion-pound ($10.1 billion) deal, helped the FTSE to an 11-month high.
The exporter-heavy index also drew support from a slide in sterling on a perceived rise in the chances of Britain exiting the European Union without a deal under new Prime Minister Boris Johnson.
Ireland’s main stock index ISEQ, which has tended to fall on fears of a disorderly Brexit, skidded 0.9%.
“The FTSE has just struck upon a bounty of news, be it Just Eat and LSE deals and the pound falling off a cliff, it’s very much in a bubble at the moment compared to the rest of the markets,” said Connor Campbell, financial analyst at Spreadex in London.
“There are still things to be found out on Wednesday from the Fed. That may be why markets are just holding back a bit.”
The pan-European stocks benchmark index was up just 0.03%, with sectors such as real estate and utilities gaining as investors favoured dividend-yielding names in expectation that interest rates globally are about to fall.
The Fed is widely predicted to cut rates by a 25 basis point for the first time in a decade on Wednesday, but investors will be watching its statement for clues on whether that is just the start of new cycle of easing by the US central bank.
Global stock markets have recovered from a deep selloff in May on hopes that major central banks would cut rates to support global growth, as the pain from a prolonged US-China trade war mounts.
Officials from both sides will meet in Shanghai this week for their first in-person talks since a G20 truce last month, but expectations for a breakthrough are low. Trade-sensitive auto stocks fell 0.8%, the most among the major sectors.
Healthcare stock were mixed with Sanofi rising 1.5% after boosting its 2019 outlook, while Novartis dropped 1.0% as a trial for a new use of its Entresto heart drug failed.
Heineken dropped 4.6% after the world’s second largest brewer missed estimates for first-half profit.
Europe’s largest low-cost carrier Ryanair slipped 1.4% after reporting a sharp profit fall in the first half of its key summer period. It said it may have to curb its growth plans further if Boeing’s schedule for returning the 737 MAX jet to service continues to slip.