June 26, 2017
Nestle targeted by Dan Loeb, Italy winds up some banks, and it’s a big week for the dollar. Here are some of the things people in markets are talking about today.
Dan Loeb’s Third Point hedge fund disclosed that it owns about 40 million shares, a $3.5 billion stake, in Europe’s largest company, Nestle SA. The investment, the single largest Loeb’s fund has made since it was founded in 1995, is part of a recent push into Europe by the activist manager, with Third Point saying in an investor letter that “it is rare to find a business of Nestle’s quality with so many avenues for improvement.” The fund is encouraging Nestle to sell its share of cosmetics maker L’Oreal SA, increase share buybacks and adopt a profitability forecast. Shares in Nestle rose as much as 4.7 percent in Zurich trading this morning.
Italy has committed as much as 17 billion euros ($19 billion) to the intervention at Banca Popolare di Vicenza SpA and Veneto Banca SpA, the two banks which the ECB said on Friday were failing or were likely to fail. The bill includes state support for Intesa Sanpaolo SpA of 5.2 billion euros to allow it acquire — for just 1 euro — the good assets in the banks without hurting capital ratios, with an additional 12 billion euros available to cover potential further losses. Intesa rallied 4 percent, with the country’s banks posting strong gains. Mayoral elections over the weekend in Italy showed that Silvio Berlusconi is still a force in the country’s politics after candidates backed by his Forza Italia party and its center-right allies made strong gains.
German business sentiment surged to a record high of 115.1 in June according to the Munich-based Ifo institute’s business climate index. While the continued good health of the economy means it will be a struggle for the opposition led by Social Democratic candidate Martin Schulz to unseat Angela Merkel in September’s election, he found something else to attack her for, saying she is too nice to U.S. President Donald Trump.
Overnight, the MSCI Asia-Pacific Index added 0.2 percent, while Japan’s Topix index gained 0.1 percent after Takata Corp.’s filing for bankruptcy did not spark a wider selloff. In Europe, the Stoxx 600 Index was 0.7 percent higher at 5:45 a.m. Eastern Time as Nestle and Italian banks rallied. U.S. stock futures were also gaining.
It is shaping up to be a busy period for the $5.1 trillion-a-day currency market which has speeches from five Federal Reserve policy makers to contend with, the likely highlight being Chair Janet Yellen’s address tomorrow. Dollar bullishness has being disappearing recently, with Commodity Futures Trading Commission data showing the lowest net bullish wagers in the futures markets of the year in recent weeks. Comments at this week’s European Central Bank’s annual forum in Portugal may also move the euro.