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European stocks struggle as investors look for catalysts

By Barbara Kollmeyer

ECB's Panetta says 'premature' to speak of paring back on bond buys

Stock prices in Europe flattened out Wednesday afternoon, with banks under pressure. Marks & Spencer shares rose after well-received results.

The Stoxx Europe 600 index was flat, alongside the German DAX and the French CAC 40 , the FTSE 100 index fell 0.3%. The pound and euro traded slightly lower against the U.S. dollar.

Bank stocks slipped as bond yields eased, with that of the 10-year German bund down 3 basis points to negative 0.198%, and the yield on 10-year U.K. gilts fell 3 basis points to 0.76%.

Yields slipped on the view that central banks won't rush to tighten acccommodative policies put in place to help combat the COVID-19 crisis. But some investors fear recent climb in U.S. consumer prices could prompt a sooner-than-expected move by the Federal Reserve to step back from its accommodative policy.

That's despite reassurances from most Fed members that they view near-term pressures as transitory. Investors will hear from Federal Reserve Vice Chair Randal Quarles on Wednesday. U.S. stocks traded modestly higher, following Tuesday's losses.

At least one European Central Bank was heard trying to reassure over policy on Wednesday. Fabio Panetta, an executive board member at the central bank said it was "clearly premature" to discuss any paring of emergency asset buying in the single currency zone even though the economic outlook is "improving."

"From my viewpoint, the conditions that we see today do not justify reducing the pace of purchases," Panetta said in an interview with Nikkei (link) that published Wednesday.

Losses for heavily weighted banks pressured the main index. A steepening yield curve helps banks borrow cheaper and then lend at higher rates of interest. A flattening yield curve works the opposite. Shares of HSBC (HSBA.LN) , BNP Paribas , and Banco Santander (SAN.MC) all fell over 1% each.

Shares of Marks & Spencer surged 7%. The retailer swung to a pretax loss for fiscal 2021 on lower revenue. But it said for the first six weeks of fiscal 2022, business was ahead of a two-year-earlier comparative. Marks & Spencer also warned over continued uncertainty and rising costs due to the pandemic and Brexit, but analysts were looking at the positives.

"MKS is emerging from COVID with a stronger B/S [balance sheet] and 21/22has started well, as improving mobility has led to 2-year stack growth in both corecategories," said a team of analysts at Jefferies led by James Grzinic.

Shares of Spire Healthcare climbed 26% after Australian multinational healthcare group, Ramsay Health Care said it would buy (link) the independent hospital group for 240 pence per share in cash.

Shares of Johnson Matthey eased 0.4% after earlier gains. The chemicals and sustainable-technologies company announced a partnership (link) with U.S.-based Plug Power (PLUG) to develop improved hydrogen electrolysers. Plug Power is a leading manufacturer of electrolysers used to manufacture green hydrogen.

-Barbara Kollmeyer; 415-439-6400;


(END) Dow Jones Newswires

05-26-21 1030ET

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