European markets down awaiting US rate pointer

AFPLondonEurope’s main stock markets closed down yesterday as traders awaited an update on the outlook for US interest rates. London’s benchmark FTSE 100 index slid 0.35% on the day to 6,937.41 points after earlier showing gains on the back of news that Royal Dutch Shell has agreed to a huge takeover of BG Group. Frankfurt’s DAX 30 index lost 0.72% to 12,035.86 points, while the CAC 40 in Paris shed 0.28% to 5,136.86 points. Traders were looking ahead to the 1800 GMT release of minutes of the last interest rate meeting of the US Federal Reserve, with dealers set to pore over them for clues as to when the US central bank plans to announce a hike in borrowing costs. News of the Shell-BG merger initially boosted the FTSE, with investors “driven no doubt by the idea that the heavily energy-directed index could see yet more merger and acquisition activity off the back of the recent fall in oil prices,” said Joshua Mahoney, analyst at IG trading group. “However, this news appears to have hidden the largely mixed sentiment seen throughout the European markets (ahead of) a crucial deadline for Greece,” he said. US stocks were trading higher following news of Shell’s $70bn (€64bn) takeover of BG as the market awaited the kick-off of earnings season. At midday trade, the Dow Jones Industrial Average was 0.27% while the tech-rich Nasdaq Composite Index gained 0.84% and the broad-based S&P 500 rose 0.36%. Shares in BG Group soared 26.65% to 1,153pence, while Royal Dutch Shell ‘B’ shares plunged 8.56% to 2,019.50 pence, with some analysts saying the offer price may turn out to be too large. Within the sector, Tullow Oil jumped more than 4%, BP gained 0.54%, while French energy giant Total was down 1.15%, to €47.05 in Paris. “The deal between Royal Dutch Shell and BG Group will prompt sector consolidation,” noted Marc Kimsey, senior trader at Accendo Markets. “The decline in oil prices over the past year has battered some stocks which are clearly now looking attractive. In the last year BG shares fell 30%... By comparison sector behemoths BP and Royal Dutch Shell have only shed 10% over the same period leaving them in the position of predator rather than prey.” Markets were also hesitant ahead of Greece’s deadline for its next bailout repayment to the International Monetary Fund of debts worth €460mn. Eurozone deputy finance ministers were meeting to seek agreement on Athens’ reforms needed to unlock the last tranche of its multibillion-dollar bailout and avert a default. Greek Prime Minister Alexis Tsipras yesterday lashed out at EU sanctions against Russia during controversial talks with Kremlin strongman Vladimir Putin in Moscow that have unnerved Brussels. Tsipras’ decision “to discuss credit options with Vladimir Putin today signals warning signs for many,” said IG’s Mahoney. “Even if the Greeks were to pay the debt as expected, the timing of this meeting shows the Greeks want to be seen to not be playing by the book. After all, that is pretty much the core mandate for its election earlier this year.”