Markets

Nestlé buoys European shares while Apple boosts US tech firms

Air France tumbles to one-year low after chief executive says he will resign

Starbucks is to be paid €7.15 billion (€5.99 billion) by Swiss-based food giant Nestlé for global market licensing of the US coffee shop chain’s products. Photograph: AFP/Getty Images

Mon May 7 2018 - 17:36

Both the Irish and UK stock exchanges were closed on Monday, however their European peers were open and shares closed higher on the day, supported by strong earnings updates and gains in Nestlé after the Swiss-based food firm agreed a tie-up with Starbucks.

A weak euro, which typically gives an accounting boost to companies who sell products or services in dollars, also contributed to lift the pan-European Stoxx 600 index 0.6 per cent.

Nestlé rose 1.6 per cent after it agreed to pay $7.15 billion (€5.99 billion) for a global coffee alliance in which it gets the rights to market Starbucks products around the world outside the US coffee company’s shops.

“At first glance, the deal looks strategically key, also because Nestlé is forging ahead in one of the most important growth categories,” said ZKB analysts in a note.

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Pay deal

Air France tumbled to a one-year low after its chief executive, Jean-Marc Janaillac, said on Friday he would resign after staff rejected a pay deal, plunging the airline into turmoil amid a wave of strikes that has cost it €300 million.

Traders said brokers were downgrading the stock while Bernstein analysts said that was the worst possible outcome for the airline carrier.

“This leaves the company with no chief executive, no labour contract, an ongoing dispute and likely emboldened unions which will be even less likely to concede on their demands now,” they said.

Over the weekend, the French government urged Air France managers and unions to resolve the stand-off. Shares in German carrier Lufthansa rose 0.4 per cent.

In earnings news, shares in Ambu rose 17.8 per cent to a record high after the Danish healthcare equipment maker raised its outlook. Forecast-beating quarterly earnings lifted Norway-focused independent oil company Aker BP 8.7 per cent, as its sector was underpinned by a surge in crude oil prices to late-2014 peaks.

Hannover RE rose 1 per cent, hitting an all-time high during the session, after the insurance group raised its guidance for 2018 gross premiums.

In the US, Wall Street opened higher as shares of technology companies were lifted by Apple’s sixth day of gains.

Oil prices

Additionally, the S&P energy index was the biggest gainer among the 11 major S&P sectors, rising 2.1 per cent as oil prices were boosted by Venezuela's deepening economic crisis and a looming decision on whether the United States will reimpose sanctions on Iran.

Apple was up 1.9 per cent, extending its gains since it reported results last week and after Berkshire Hathaway on Friday disclosed that it had boosted its stake in the iPhone maker. Warren Buffett told CNBC on Monday: "I'd love to own 100 per cent of it."

Data showing weaker-than-expected US wage growth on Friday has allayed investor fears about rising interest rates and inflation, helping the S&P 500 bounce off its 200-day moving average, a technical level that indicates long-term trend. – Reuters

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