European markets ended the day with marginal changes in either direction, reflecting the indecision between European Central Bank monetary policy committee and the inability of a short economic event list to drive the markets.
[U][B]Europe Session Key Developments[/B][/U]
[B]• ECB Policy Officials Offer Contrary Opinions over Quantitative Easing Outlook
• Short Economic Docket Leaves Markets without a Discernible Direction[/B]
European markets ended the day with marginal changes in either direction, reflecting the indecision between European Central Bank monetary policy committee and the inability of a short economic event list to drive the markets. This is certainly not the first time ECB policy officials have maintained contrary opinions amongst one another. Prior to the rate decision by the central bank on May 7th, ECB President Trichet had to issue a gag-order to control the confusion generated from the policy makers. However, we can see the same problem about to rear its ugly head again as Bundesbank’s President Axel Weber is voicing concerns over a potential sharp rise in inflation and asserts a cap of €60 billion euro used for quantitative easing (QE); meanwhile Slovenia’s President Marko Kranjec states the ECB will likely increase QE efforts and perhaps expand the program further than euro-dominated covered-bonds. Although a healthy dose of argument to represent both perspectives is always welcomed, a clear opposition between ECB members could lead to a loss of confidence that the ECB will be able to lead the euro region out of the recession. Taking a look at the economic docket, we can see a lack of known market-movers for the day. Despite another contraction in EU car registrations and a decline in Swiss factory prices year-over-year, the indicators proved to be ineffective to push the markets lower. However, market participants will certainly pay close attention to economic events tomorrow as forecasts indicate a dismal contraction in German and Euro-Zone economic activity.
[B]FTSE 100 4,362.58 +31.21 +0.72%[/B]
The FTSE closed the day with marginal gains as all sectors posted gains except Health Care and Oil & Gas, which fell 0.25% and 1.14%, respectively. Financials, Technology and Industrials were the sectors that helped boost the index higher with gains over 2% each. Invensys, a supplier of controls for whirlpool washing machines was one of the top gainers in the index with a 13.25% advance as the company announced plans to pay the first dividend in six years. AstraZeneca fell 1.75% after the drugmaker’s rating was downgraded by Jefferies to “underperform.”
[B]CAC 40 3,156.29 +3.39 +0.11%[/B]
France’s leading index saw marginal gains with an evenly balanced amount of losing and winning sectors. Industrials, Technology and Oil & Gas were the only sectors which moved more than 1%. Cie de Saint-Gobain, a European supplier of building materials was one of the top winners for the day, jumping 5.81% after Bank of America upgraded the company to a “buy” rating. Bouygues fell 2.69% after the construction company announced a 2% drop in 1Q sales. Total SA was another loser for the day, falling 1.68% as the International Energy Agency forecasted lower demand for crude oil in 2009.
[B]DAX 4,738.47 +10.86 +0.23%[/B]
German equities edged slightly higher despite only Industrials, Financials, and Telecommunications being able to close in the green. Salzgitter was one of the top gainers with a 5.03% rally even though the company posted a 1Q pre-tax loss. Salzgitter also announced a target for a pre-tax break-even for 2009. Commerzbank fell 3.2% after a report indicated the bank may still need €13 billion to repay government funds.
[B]IBEX 35 8,984.20 -16.40 -0.18%[/B]
Spain’s stock market closed the day with a small loss as no sector in the IBEX 35 moved more than 1%. Repsol, a Spanish oil refiner also fell 0.87% due to IEA cutting forecasts for crude oil demand in 2009. Endesa, a Spanish power producer rose 2.43% as the company expanded their operations to Portuguese markets. Gamesa also gained 4.47% as investors anticipated 1Q earnings for the wind-turbine maker.
[B]S&P/MIB 19,271.00 -110.00 -0.57%[/B]
Italy’s leading index posted a loss for the day with Basic Materials and Telecommunications dragging the index lower with a 3.91% and 3.04% loss, respectively. The declines were countered by rallies in Consumer Services and Industrials. Banco Popolare was one of the gainers for the day, rising 2.74% after the bank was upgraded to “market perform” by Keefe, Bruyette & Woods. Geox was the top loser with a 8.98% decline as 1Q earnings fell 9% year-over-year.
