Germany’s defense stocks fall after lawmakers open door to higher spend; Rheinmetall sheds 6.3%

German defense stocks were lower in mid-morning trade, a day after the country’s parliament approved a landmark fiscal package that will allow higher government defense and infrastructure spending.

Rheinmetall, one of the top performers on the Stoxx 600 on Tuesday, was down 6.3% at 10:40 a.m. in London. Renk Group and Hensoldt were 10% and 8.5% lower, respectively.

Defense names have been on a strong run this year on expectations of security spending boosts across the region.

“It’s going to be some time before we see contracts coming through and the implications from a corporate profitability perspective of the package that’s been put through in Germany,” Lindsay James, investment strategist at Quilter Investors, told CNBC’s “Squawk Box Europe” on Wednesday.

Spanish lender BBVA said Wednesday that Morocco’s central bank had approved an indirect change in control of the country’s Banco Sabadell branch, as a part of BBVA’s hostile takeover bid for its domestic peer.

BBVA said the greenlight from the Central Bank of Morocco meant it now had “all the authorizations needed from international regulators to complete the transaction.”

BBVA CEO Onur Genҫ said the bank now only needed approval from the Spanish Competition Authority, which has conducted investigations into the impact the merger could have on the domestic market.

“We have presented an unprecedented list of remedies, basically giving volume guarantees and price guarantees — guaranteeing the price of loans in certain geographies for certain segments,” he said. “Based on those remedies, our expectation is that they will give us light in the next few weeks.”

Genҫ said that if the regulator does approve the takeover, the government can choose to review the case, paving the way for Banco Sabadell shareholders — who he dubbed “the rightful owners of the decision” — to decide whether to tender their shares.

BBVA first made a merger offer for its domestic peer last April — a bid that Sabadell has publicly opposed, with its CEO César González-Bueno telling CNBC last month that “competition would suffer” if the bank is absorbed by BBVA.

“On top of that, they are not paying the price,” he said at the time. “With everything that it’s on the table, the answer is a very, very clear ‘No.'”

— Chloe Taylor

Germany’s DAX index was around 0.2% lower by 9:34 a.m. in London, putting it on track to end a three-day winning streak.

It came after lawmakers voted to reform public borrowing rules, paving the way for increased national defense spending.

Vonovia, down 2%, and Brenntag, which shed 1.7% during early trade, were among the biggest losers on the DAX.

The MDAX index — home to 50 German midcap companies — also moved lower on Wednesday morning, shedding 0.3%.

Traton and Hypoport sustained the MDAX’s biggest losses, down 4.6% and 3.8% respectively.

— Chloe Taylor

Rio Tinto has called on its shareholders to reject hedge fund Palliser Capital’s ongoing push for a unification of the dual-listed mining giant.

The firm currently operates under a dual listed companies (DLC) structure, and it is divided into Rio Tinto PLC — traded on the London Stock Exchange — and Rio Tinto Limited — listed on the Australian Securities Exchange. The two companies’ boards of directors are made up of the same individuals.

On Wednesday, Rio Tinto said London-based Palliser Capital — a major shareholder in the company — had requisitioned a directive for the formation a committee of independent directors, to examine whether unifying the firm into a single Australian holding company would be in shareholders’ best interests.

Rio Tinto’s board urged shareholders to reject the motion at its annual general meetings in April and May.

“The Board has already conducted a robust and comprehensive review of a unification of the DLC with five leading external advisers, the conclusions of which are clear,” it said in a statement on Wednesday. “A unification of the DLC would be value destructive for the Group and its shareholders.”

Toward the end of 2024, Palliser wrote to Rio Tinto’s board of directors to call for the unification of the DLC into a single Australian domiciled holding company.

It argued at the time that the DLC structure had destroyed around $50 billion in shareholder value since Rio Tinto became dual listed three decades ago. In the Wednesday statement, Rio Tinto labeled assertions about $50 billion of value erosion “both unfounded and misleading.”

Shares of Rio Tinto were 1% lower at 9:30 a.m. London time.

— Chloe Taylor

The Bank of England is widely expected to hold interest rates when it meets on Thursday, as the U.K. faces economic headwinds both at home and abroad.

The central bank is highly likely to keep its benchmark interest rate at 4.5% at its March meeting, given the unpredictability of President Donald Trump’s trade tariffs and a fledgling global trade war, and how those factors could affect inflation in the U.K.

Read the full story here.

— Holly Ellyatt

The British unit of Spanish lender Santander on Wednesday said 750 of its staff were at risk of redundancy as it targets 95 branch closures in the U.K.

Read the full story here.

— Ruxandra Iordache

London’s FTSE 100 is expected to be little changed at the open, according to IG, while the French CAC 40 is expected to shed 0.2% and the German DAX is slated to open around 0.5% lower.

A downward move in the DAX — home to Germany’s biggest companies — would end three consecutive days of gains for the index, which has added 17.4% since the beginning of the year.

— Chloe Taylor