Global stocks inched higher on Thursday, September 7, as markets waited for clues on just how close the European Central Bank is to scaling back its more than 2 trillion euro ($2.75 trillion) stimulus programme.
Markets also benefited from relief that the U.S. Congress struck a deal on the country’s debt limit and that there had been no further ratcheting up of the North Korea crisis in Asia.
Most European markets had managed to shake off what had been a sluggish start to leave the pan-regional Stoxx 600 index up 0.4 percent. A fifth day of gains in auto stocks helped German shares outperform.
President Mario Draghi is expected to lay the groundwork for winding down the ECB’s 60 billion-euro-a-month asset purchase programme, though few investors expect to see a clear framework just yet.
There were relief of sorts too after Donald Trump and U.S. Congress leaders struck a surprise deal to push a showdown on the country’s debt limit back to December, and that there had been no further escalation in the North Korea crisis.
A fifth day of gains in auto stocks helped German shares outperform a sluggish open for European equities with banks under pressure before the much-awaited ECB meeting. [.EU]
ECB President Mario Draghi is expected to lay the groundwork to wind back its asset purchase program, though few investors expect to see a clear framework just yet.
MSCI’s broadest index of Asia-Pacific shares .MIAPJ0000PUS gained 0.3 percent while Japan’s Nikkei .N225 rose 0.2 percent.
South Korea’s KOSPI .KS11, which has been burdened by tensions over North Korea, jumped 1.2 percent too, on course to mark its biggest gain in four months amid signs that major powers were talking intensively on the situation.
Sentiment had also been helped after U.S. President Donald Trump forged a surprising deal with Democrats in Congress to raise the U.S. debt limit and provide government funding until Dec. 15, embracing his political adversaries and blindsiding fellow Republicans in a rare bipartisan accord.
There was some disappointment the deal had been so short term. But U.S. economic data was also fairly upbeat. A gauge of services sector activity by the Institute for Supply Management (ISM) [USNPMI=ECI] accelerated in August.
“The deadline on the debt ceiling has been extended just by three months so it will come back to haunt markets again later this year. Still, markets liked it as we don’t have to worry about it for now,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.
The news lifted yields on U.S. Treasuries, with the 10-year yield holding back to 2.1 percent US10YT=RR from its 10-month low of 2.054 percent touched on Wednesday.
Traders are now shifting their focus to Hurricane Irma, ranked as one of the five most powerful Atlantic hurricanes in the last 80 years, which was passing over the northernmost Virgin Islands on Wednesday afternoon and expected to reach Florida at the weekend.
Nestle, Unilever think small in Big Food’s sales quest
Nestle (NESN.S) and Unilever (ULVR.L) both snagged up small, artisanal brands on Thursday, part of a drive by big food firms to boost slowing sales with products seen as ethical or healthy.
Changing consumer tastes and habits have rocked the processed food sector, letting upstarts steal market share from traditional brands with the growth of e-commerce, social media and interest in sustainability and health.
Natural, organic, artisanal or plant-based products have been a bright spot in an otherwise tepid market, where the need to buy growth and cut costs led to Danone’s (DANO.PA) purchase of WhiteWave and failed attempts by Kraft Heinz (KHC.O) to buy Unilever and Mondelez (MDLZ.O) to buy Hershey (HSY.N).
Nestle, the world’s largest processed food company which has recently become a target of activist shareholder Third Point, said on Thursday it has agreed to buy Sweet Earth, a U.S. maker of frozen meals, burritos and burgers that use meat substitutes.
That marks its first foray into the U.S. market for plant-based foods like tofu and seitan, which is growing at a double-digit rate annually and expected to reach $5 billion (£3.83 billion) by 2020.
Meanwhile Unilever said it has bought the small British organic tea brand Pukka, known for herbal teas with catchy names such as mint matcha green and turmeric gold.
The acquisition extends the world’s largest teamaker into the market for organic tea, which Euromonitor says will grow by 22 percent to reach $1.2 billion by 2021.
The Nestle logo is pictured on the company headquarters entrance building in Vevey, Switzerland February 18, 2016. REUTERS/Pierre Albouy/File Photo
Euromonitor analyst Maria Mascaraque said the market for organic food and drinks is still a small part of the total, but should continue to grow strongly.
“(The market) shows growth opportunities based on the evolution of consumers’ priorities towards the consumption of natural foods and beverages as well as the increasing interest in social and environmental responsibilities,” Mascaraque said.
Neither company disclosed what they were paying for their respective acquisitions, but Unilever said Pukka has annual sales of 30 million pounds and growth of 30 percent.
This should lift Unilever’s portfolio, which includes large brands Lipton and PG Tips, and which Euromonitor says has seen its market share slip over the past five years.
Unilever has done a string of small deals, including Sir Kensington’s mayonnaise, Talenti and Grom gelatos and Dollar Shave Club, that expand its presence in categories that are challenging traditional consumer brand models.
For its part, Nestle recently announced it had taken a stake in food delivery service Freshly, as it seeks to keep up with changing consumer preferences.
Nestle said Sweet Earth would remain independent from its U.S. food business, which includes DiGiorno pizzas and Hot Pockets, and continue to be led by its founders.
