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European stocks slipped and U.S. equity were flat on Wednesday, as investors kept close watch on U.S. Treasury yields that hovered at year highs. Shares of Kering and British American Tobacco led decliners after reporting results.
The Stoxx Europe 600 index SXXP, -0.46% dropped 0.3% to 417, after snapping a three-day winning streak on Tuesday with a modest decline. The German DAX DAX, -0.73% led regional indexes lower with a 0.7% drop, followed by around a 0.2% fall in the CAC 40 PX1, -0.20% and FTSE 100 UKX, -0.38%.
U.S. stock futures ES00, -0.11% YM00, -0.08% NQ00, -0.19% inched lower after the S&P 500 SPX, -0.06% and the Nasdaq Composite COMP, -0.34% finished modestly weaker on Wednesday. The Dow Jones Industrial Average DJIA, +0.20% eked out a fresh record close, as freezing U.S. temperatures pushed energy prices and stocks higher.
Oil prices remained elevated on Wednesday, with U.S. crude CL.1, +0.33% above $60 a barrel and Brent BRN00, +0.60% atop $63 a barrel, but natural-gas prices NG00, -1.98% were easing somewhat. Shares of energy companies rose, with Total TOT, +3.23% FP, +2.76% up 1.2% and BP BP, +5.80% BP, +1.51% and Royal Dutch Shell RDS.A, +4.26% RDSA, +1.30% up by nearly 1% each.
Pressure on the bond market remained a focal point for investors, with the yield on the 10-year Treasury note TMUBMUSD10Y, 1.292% dipping to 1.28% from 1.30% on Tuesday, but still hovering at levels not seen in a year. The 10-year U.K. gilt yield TMBMKGB-10Y, 0.614% has also been climbing, last at around 0.614%.
“Combined with sharp rises in energy and commodity prices there is rising concern that higher prices will not only choke off any post pandemic recovery, due to higher borrowing costs, but they could also crimp future consumer spending due to higher living costs,” said Michael Hewson, chief market analyst at CMC Markets, to clients in a note.
Data showed U.K. consumer prices rose 0.7% on the year in January, versus a 0.6% rise a month earlier, the Office for National Statistics said Wednesday. That number is still under the Bank of England’s 2% goal.
Among shares on the move, Kering KER, -8.05% stock tumbled 7%, after the luxury-goods group reported a drop in 2020 net profit, weighed by store closures and a lack of tourists, and with poor sales for its flagship Gucci label.
Loïc Morvan, analyst at Bryan, Garnier & Co., said Gucci’s problems have been driving weakness for Kering shares in recent months, but he is maintaining a buy rating on the company.
“This Italian brand has been affected by wholesale channel (15% of 2019 sales)
rationalization (closure of corners in department stores, especially in U.S. and in
Europe) which should bear fruit in medium term implying higher brand equity, despite some short-term impact,” said Morvan, in a note.
British American Tobacco BATS, -5.20% BTI, +1.71% shares tumbled 4%, after the tobacco group reported higher 2020 profit, but said the COVID-19 pandemic would continue to weigh this year. The company also disappointed some analysts with its outlook.
“BAT is guiding to another year of (only) mid-single digit underlying EPS [earnings per share] growth, reflecting COVID-19, the tough comp in the U.S., and the need to continue investing heavily in NGPs [next generation products],” said Citi analysts Adam Spielman and Ravi Sharma, in a note to clients.
Shares of Koninklijke Ahold Delhaize AD, -3.02% fell over 2%, after the Dutch grocer swung to a net loss for the fourth quarter of 2020 on elevated costs associated with its U.S. business.
And shares of Rio Tinto RIO, +2.80% RIO, +4.75% climbed 3.6%, after the miner unveiled a surprise special dividend after a sustained iron-ore price rally drove a 22% gain in annual net profit.
Deal news drove shares of Total Produce T7O, +29.97% 30% higher. The Ireland-based food producer announced that it has reached a deal to combine with rival Dole Food Company in the U.S. The newly formed company, Dole, will seek a public listing in New York.
Under terms of the deal, Total Produce shareholders will receive 82.5% of Dole shares, and Castle & Cook shareholders, who own a remaining 55% stake in Dole Food that wasn’t previously bought by Total Produce, will get 17.5% of shares.
