The European Union approved UniCredit’s bid for Banco BPM with conditions, clearing a hurdle for the deal to go ahead after Italian officials tried to intervene on national security grounds. UniCredit committed to sell 209 branches in areas of Italy where the two banks have overlap to address competition concerns raised by the European Commission, the EU body said Thursday. The European Commission–the bloc’s antitrust enforcer–said the commitments fully address those concerns. The Italian banks didn’t immediately respond to requests for comment. UniCredit said earlier in June that the European Commission’s merger enforcer had indicated it wouldn’t carry out an in-depth probe of the deal after the lender offered concessions to ease the regulator’s concerns. The clearance comes just as EU policymakers are leaning toward allowing European companies in some key sectors–such as telecommunications, defense or banking–to consolidate in order to compete with their overseas rivals. The commission is currently reworking the guidelines it uses to implement its own merger rules, seeking feedback from interested parties until September. UniCredit launched an all-stock offer last November for Banco BPM, which at the time valued the Italian lender at 10.1 billion euros ($11.60 billion), part of a broader push to strengthen its foothold in Italy and increase its market share in the northern part of the country. Banco BPM has rejected the approach.

The conflict in the Middle East also overshadowed events on the Swiss stock market on Thursday. The Swiss National Bank (SNB) lowered its key interest rate by 25 basis points to 0.0 per cent, which was expected by the majority of analysts. However, some economists had expected negative interest rates to return, according to the market. The Swiss franc rose slightly in reaction to the interest rate decision. The US Federal Reserve's interest rate decision the previous evening brought no surprises and did not set the tone on the market. The US stock markets were closed on Thursday due to a public holiday, so there was no impetus from there. The SMI lost 0.7 per cent to 11,872 points. Of the 20 SMI stocks, 18 recorded price losses. The only two winners were Novartis (+0.3%) and Roche (+0.4%). A total of 14.98 (previously: 18.15) million shares were traded. A drastic decline in Swiss watch exports in May caused Richemont shares to fall by 2.7 per cent. Swatch fell in price by 2.1 per cent. After exports had benefited from pull-forward effects in April, the trend reversed in May, commented analysts at Bernstein. Market participants blamed an analyst commentary for the 2.4 per cent drop in Partners Group's share price. Goldman Sachs downgraded Partners Group to ‘Neutral’ from ‘Buy’ and lowered the price target to 1,150 from 1,250 Swiss francs. UBS shares lost 1.8 per cent. The SNB supports the stricter capital requirements for the bank demanded by the government. The SNB's financial stability report stated that UBS already fulfils the fully implemented too-big-to-fail capital requirements (calculated on a pro forma basis) that will apply from 2030. From a market perspective, this came as no surprise. However, the capital ratios of the parent bank calculated at individual institution level overestimate its actual resilience and are therefore susceptible to impairments on these holdings, it was said.

Europe
Europe's stock markets closed weaker on Thursday. Uncertainties remained high and caused investors to exercise caution. According to media reports, the US is preparing a possible military strike against Iran, possibly at the weekend. Meanwhile, US President Donald Trump refused to be drawn on the cards: He may or may not order a military strike, he announced. The DAX lost 1.1 per cent to 23,057 points, while the Euro-Stoxx-50 fell by 1.3 per cent. Holiday trading on the day of the report further thinned out volumes. The Bank of England left its key interest rate unchanged Thursday, mirroring the Federal Reserve’s decision a day earlier, as policymakers face a rise in oil prices that could push inflation further above their target. The BOE left its key rate at 4.25%, having cut in May. But policymakers said they are likely to lower borrowing costs at a “careful and gradual” pace. Their caution has been reinforced by the conflict between Israel and Iran, which has pushed oil and natural-gas prices sharply higher. “Interest rates are on a gradual downward path, although we’ve left them on hold today,” said Gov. Andrew Bailey. “The world is highly unpredictable”. Stocks in the U.K. slipped Thursday, as the FTSE 100 Index dropped 0.6% to 8791.80. Among large local companies, Hays was the biggest laggard, plunging 9.8%, followed by shares of Breedon Group, which plunged 9.3%. Shares of PageGroup plunged 8.4%. Ithaca Energy was the biggest leader during the session, adding 3.7%, and IntegraFin Holdings rose 2.9%. Melrose Industries rounded out the top three movers, as shares gained 2.7%. In other parts of Europe, the STOXX Europe 600 Index fell 0.8% from the previous close. Stocks in Belgium slipped Thursday, as the BEL-20 Index fell 0.3% to 4411.71, the third consecutive session of decreases.

United States
Wall Street was closed this Thursday due to a public holiday.

Asia
At the end of the week, the stock markets in East Asia recovered from the previous day's losses. In Seoul, the Kospi rose by 1.2 per cent. There, the prospect of stronger growth as a result of a supplementary budget proposed by the government is providing additional support. According to analysts at Nomura, the Japanese central bank could raise its growth forecast for the current year to 1.0 per cent from 0.8 per cent. In Hong Kong, the HSI rose by 1.2 per cent, while the market barometer in Shanghai held up well.

Bonds
At around 7.40am, the rate on the ten-year U.S. Treasury bond was stable at 4.39%. The rate on the two-year bond was down 1 basis point (0.01 percentage point) at 3.94%.

Analysis
Bank of America lowers Prosus target to EUR 66 (67) – Buy
Deutsche Bank lowers LVMH target to EUR 535 (565) – Hold
Deutsche Bank starts Telekom Austria with Hold and target 11 EUR