European Stocks Edge Higher Amid Merger Talks

By Sruthi Shankar
(Reuters) – European stocks edged higher on Wednesday, buoyed by Renault (EPA:RENA) amid discussions of a potential merger between Japan's Honda (NYSE:HMC) and Nissan (OTC:NSANY). However, gains were limited as investors remained cautious ahead of the Federal Reserve's policy decision and outlook.

The pan-European STOXX 600 increased by 0.1% by 0925 GMT, with Asian stocks also adopting a wait-and-see approach.

French carmaker Renault saw a rise of 6%, leading the STOXX 600 after reports emerged of a potential collaboration between Japan's leading automotive manufacturers. Renault possesses a 36% stake in Nissan.

The Fed is widely anticipated to cut rates by 25 basis points (bps) later today, a move some analysts are calling a "hawkish cut," which will be announced alongside updated interest rate forecasts and economic outlooks.

U.S. Treasury yields have surged to multi-week highs, putting downward pressure on global stocks as investors reconsider the pace of Fed rate cuts projected for the following year.

Analysts from Unicredit (BIT:CRDI) noted that recent macroeconomic data indicates U.S. economic activity remains resilient, the labor market is softening but contained, and progress on disinflation has stalled over recent months. This suggests that the Fed will likely adopt a slower pace of rate cuts, with the expectation of one 25bps cut per quarter in the first half of 2025, dependent on data.

In the UK, the FTSE 100 gained 0.4% as the British pound weakened in anticipation of the Bank of England's (BoE) rate decision on Thursday, where it is anticipated to hold rates steady.

UK inflation reached an eight-month high in November; however, the stability in service prices, which the BoE closely monitors as an inflationary pressure measure, provided some relief for the central bank.

In company news, Commerzbank (ETR:CBKG) surged by 3.3% after Italian bank UniCredit announced it had raised its stake in the German lender to 28% by entering into new derivatives contracts.

British fintech firm Wise (LON:WISEa) rose by 4.2%, reaching a more than three-year high.

Grenergy experienced a significant jump of 19.2% after the Spanish renewable energy firm agreed to sell its asset portfolio in Chile to ContourGlobal, a company under KKR, for an enterprise value of $962 million.