By Barbara Kollmeyer
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 /zigman2/quotes/210599654/delayed XX:SXXP -0.46% dropped 0.3% to 417, after snapping a three-day winning streak on Tuesday with a modest decline. The German DAX /zigman2/quotes/210597999/delayed DX:DAX -0.13% led regional indexes lower with a 0.7% drop, followed by around a 0.2% fall in the CAC 40 /zigman2/quotes/210597958/delayed FR:PX1 -0.13% and FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX -0.39% .
U.S. stock futures /zigman2/quotes/209948968/delayed ES00 -0.14% /zigman2/quotes/210407078/delayed YM00 -0.04% /zigman2/quotes/210219788/delayed NQ00 -0.20% inched lower after the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.02% and the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -0.36% finished modestly weaker on Wednesday. The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.16% 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 /zigman2/quotes/211629951/delayed CL.1 +0.22% above $60 a barrel and Brent atop $63 a barrel, but natural-gas prices were easing somewhat. Shares of energy companies rose, with Total /zigman2/quotes/201824152/composite TOT -0.13% /zigman2/quotes/206172043/delayed FR:FP -0.46% up 1.2% and BP /zigman2/quotes/207305210/composite BP +0.94% /zigman2/quotes/202286639/delayed UK:BP +1.15% and Royal Dutch Shell /zigman2/quotes/205095589/composite RDS.A -0.51% /zigman2/quotes/206428183/delayed UK:RDSA +0.49% 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 /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +1.50% 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 /zigman2/quotes/211347177/realtime BX:TMBMKGB-10Y +1.65% 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 /zigman2/quotes/204653408/delayed FR:KER +0.74% 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 inEurope) which should bear fruit in medium term implying higher brand equity, despite some short-term impact,” said Morvan, in a note.
British American Tobacco /zigman2/quotes/209116881/delayed UK:BATS +0.09% /zigman2/quotes/210207837/composite BTI +0.13% 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 /zigman2/quotes/201849038/delayed NL:AD -0.82% 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 /zigman2/quotes/208934945/delayed UK:RIO -0.32% /zigman2/quotes/202627887/composite RIO -0.57% 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 /zigman2/quotes/208389779/delayed IE:T7O +1.95% 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.