Merger or spinoff? | Calamatta Cuschieri

Markets in Europe closed in the green on Thursday as investors kept their focus on trade and political uncertainty across the globe. Meanwhile, the Brexit negotiations were supposed to continue after the report that Brussels was ready to accept a free trade agreement with the United Kingdom as long as long as it includes a customs border, something London has so far been unwilling to accept.

In London, the FTSE 100 finished 0.45% higher. Publishing company Pearson gained 2.82%. French CAC 40 rose 0.47% at the close with Sanofi as the top performer rising 2.15%. Germany's DAX added 0.40% at the end of the trading session. ThyssenKrupp led the gains as it soared nearly 10% following an announcement the company would split into two.

Draghi calls for further caution

Mario Draghi, president of the European Central Bank, highlighted the role of macro prudential policy in the prevention of financial instability. Speaking in Frankfurt, he said policymakers help keep growth sustainable with monetary measures, but that the need for the application of the "appropriate tools in a timely fashion" is getting more demanding, with the stress on the nonbank financial sector.

The Eurozone's chief supervisor said the greater use of market-based finance and other developments require "commensurate additions to the policy toolkit." Draghi cited examples of varying implementation by geographical area to strengthen the impact on local hotspots like in real estate. In some countries, there is the countercyclical buffer rate, systemic risk buffer or requirements for banks to increase capital, he added.

Tata Steel, ThyssenKrupp deal

European commission responsible for competition announced that it is launching a probe into the merger between Indian Tata Steel Ltd. and German ThyssenKrupp AG in order to determine how the agreement will affect the competition. If approved, the new company would control roughly 27% of the European market for flat steel, making it the second biggest steel producer on the old continent. The combined revenue of the two steel giants would be €17 billion, with both of them owning half of the new company.

However, shortly after the announcement, sources close to the matter claimed ThyssenKrupp is considering a structural overhaul which would lead to a separation of steel and other operations into two companies. It is said the company would spin off its elevators, car parts and plant engineering businesses to shareholders, with Thyssenkrupp Materials, the company that will hold the remaining assets, initially retaining a minority stake. The German steel producer traded almost 10% in the green.

Disclaimer: This article was issued by Rodrick Duca, trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.