BBVA, Spain’s second-largest lender by assets, launched a hostile, $12 billion-plus takeover bid for smaller rival Banco de Sabadell, signaling a potential resurgence of dealmaking in Europe’s long-moribund banking sector. The move, however, immediately triggered criticism from Spain’s economy minister, highlighting the formidable political obstacles that often accompany large tie-ups between banks. The hostile bid comes days after Sabadell’s board rejected an all-stock offer from BBVA, or Banco Bilbao Vizcaya Argentaria. It underscores BBVA’s continued hunger for the smaller bank, which it first tried to acquire four years ago. Aside from UBS’s rescue takeover of Credit Suisse, deals among European banks have been rare in recent years, as the sector has contended with the fallout from economic crises, negative interest rates, the Covid-19 pandemic and the war in Ukraine. But higher rates have made lending more profitable, boosting earnings and allowing banks to shore up capital. Despite the checkered history of mergers and acquisitions involving banks, some investors are hoping for a pickup in European financial M&A that would let the industry’s bigger players cut costs and attain greater scale.

The Switzerland market ended on a firm note on Wednesday, extending recent gains, amid continued optimism about interest rate cuts by several central banks, including the Swiss National Bank. Investors continued to react positively to some upbeat earnings updates as well. The benchmark SMI ended with a gain of 89.24 points or 0.78% at 11,602.21, the day's high. Sandoz Group rallied about 4.25% after Deutsche Bank raised the stock's price target to 28 francs, up from 26 francs. Nestle gained 2.21%, Geberit advanced nearly 2% and ABB ended 1.84% up. ABB has agreed to create a new joint venture with cable management systems supplier Niedax Group to meet demand for cable tray products and services in North America. SIG Group climbed 1.44%, while Lonza Group, Kuehne & Nagel, Swiss Re, Schindler Ps, Straumann Holding, Zurich Insurance Group, Novartis and Sika gained 0.7 to 1.2%. Holcim and Swatch Group also ended notably higher. Lindt & Spruengli drifted down 2.35%. UBS Group ended lower by 1.7% on profit taking after previous session's strong gains. Julius Baer closed 1.02% down.

Europe
European stocks closed broadly higher on Thursday with most of the major markets extending recent gains, amid rising optimism about interest rate cuts by several central banks. Geopolitical tensions weighed a bit on sentiment and limited markets' upside. Data showing a much bigger than expected increase in U.S. jobless claims in the week ended August 26th, has added to optimism that the Federal Reserve will lower interest rates in the coming months. The Bank of England maintained its key policy rate for the sixth consecutive meeting today, with the Monetary Policy Committee deciding to hold the Bank Rate at 5.25% again in a split vote. The current bank rate is the highest since early 2008. While seven members judged that maintaining the rate at the current level was warranted, Swati Dhingra and Dave Ramsden sought a quarter-point reduction at the meeting. Dhingra and Ramsden said the Bank Rate needed to become less restrictive to enable a smooth and gradual transition in the policy stance, and to account for lags in transmission. 'The MPC remained prepared to adjust monetary policy as warranted by economic data to return inflation to the 2% target sustainably,' the bank said. The pan European Stoxx 600 ended 0.19% up. The U.K.'s FTSE 100 gained 0.33%, Germany's DAX advanced 1.02%, and France's CAC 40 climbed 0.69%.

United States
Following the lackluster performance seen over the two previous sessions, stocks moved mostly higher during trading on Thursday. The Dow extended its winning streak to seven sessions, once again reaching its best closing level in over a month. The major averages ended the day just off their highs of the session. The Dow jumped 331.37 points or 0.9 percent to 39,387.76, the S&P 500 climbed 26.41 points or 0.5 percent to 5,214.08 and the Nasdaq rose 43.51 points or 0.3 percent to 16,346.26. The strength on Wall Street came following the release of a Labor Department report showing a much bigger than expected increase by first-time claims for U.S. unemployment benefits in the week ended May 4th. The report said initial jobless claims climbed to 231,000, an increase of 22,000 from the previous week's revised level of 209,000. Economists had expected jobless claims to inch up to 210,000 from the 208,000 originally reported for the previous week. Among individual stocks, shares of AppLovin (APP) skyrocketed after the mobile technology company reported first quarter results that beat expectations on both the top and bottom lines. Glasses retailer Warby Parker (WRBY) also showed a substantial move to the upside after reporting a narrower than expected first quarter loss on revenues that exceeded estimates. On the other hand, shares of Airbnb (ABNB) moved sharply lower after the vacation rental company reported better than expected first quarter results but provided disappointing guidance. Telecom stocks moved sharply higher over the course of the trading session, resulting in a 4.2 percent spike by the NYSE Arca North American Telecom Index.

Asia
Hopes of an interest rate cut and good news from Wall Street are creating a favourable mood on the East Asian stock exchanges and in Sydney on Friday. Asian indices gained between 0.2 per cent to 38,163 points on the Nikkei index in Tokyo and 1.7 per cent on the HSI in Hong Kong. Only Shanghai is edging downwards, where the trend is just holding steady as investors hold back ahead of inflation data due at the weekend.

Bonds
In the U.S. bond market, treasuries rebounded following the modest pullback seen on Wednesday. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 4.3 basis points to a one-month closing low of 4.449 percent.

Analysis
Morgan Stanley raises Puma target to 48 (45) EUR – Equalweight
Citi raises Munich Re target to EUR 475 (448.20 – Neutral
BoA lowers Hellofresh target to 5.60 (6) EUR – Underperform

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