European markets continued to move higher with four of the five major indices now in positive territory on the year. Prospects for recovery remain high as expansion in India and China and improvements in Canada show demand increasing.
[U][B]Europe Session Key Developments[/B][/U]
[B]• Fundamentals Show Signs of Improvement
• Expectations for Global Recovery Remain High
• BNP Paribas Earnings Keep Financials Positive[/B]
[B]European Stocks Continue to Rise as Optimism in Recovery Grows[/B]
European markets continued to move higher with four of the five major indices now in positive territory on the year. Prospects for recovery remain high as expansion in India and China and improvements in Canada show demand increasing. Fundamental indicators in Europe showed signs of improvements as PMI rose more than expected in the Euro-Zone and Britain and showed that contraction is easing in the region. Also adding to the optimism was a rise in UK consumer confidence above expectations. Despite the improvements, several releases showed weakness including a large industrial output contraction in Spain, further declines in UK house prices, and poor retail sales in the Euro-zone. Although signs are mixed, risk appetite is rising as traders return to equity markets and have helped indices pare sharp losses seen early in March. While US stress test results on Thursday may show that as many as ten or more of the nineteen institutions need more capital, investors are not concerned as confidence remains high that successful actions will be taken to deal with the situation. Also, declines in the LIBOR-OIS spread to 77 basis points, the lowest since mid August, have kept investors positive that credit markets are stabilizing.
[B]FTSE 100 4,396.49 +59.55 +1.37%[/B]
The UK index rose more than one percent on the session as eight of the ten indices rose with minimal declines of less than one percent in industrials and utilities. Indicators released in the UK showed a rise in confidence and PMI while house prices fell more than expected in April. Optimism remains high in the British market and earlier in the session, the FTSE went positive on the year-to-date before falling back slightly. Leading advancers was satellite operator Inmarsat with an 11% gain following new distribution agreements with partners. Also rising sharply was UK bank Standard Charter with a 9.22% rise as much of the firm’s revenue comes from Asia. On the downside were firms including electricity generator Drax falling 7.08% following dividend payout and Lloyds with a 6.52% decline. Nearly three-fourths of all firms posted gains on the session.
[B]CAC 40 3,283.51 +58.51 +1.81%[/B]
Trading in the French market led to gains in all sectors except for a 2.79% fall in utilities as GDF Suez shares sent the sector lower. GDF declined 4.91% as Rome’s mayor commented that the city may decide not to sell its gas grid to the company. Leading gains was Air France as Cheuvreux upgraded the firm to outperform and fears of a flu pandemic remain in check. Also seen rising sharply was lender Dexia with a 8.41% gain and a move of more than 7% in BNP Paribas shares. BNP reported positive first quarter results that helped raise optimism in the banking sector. Aside from better-than-expected earnings, the firm went further to add that it will not need to raise capital going forward.
[B]DAX 4,880.71 +27.68 +0.57%[/B]
The German index posted a small rise on the session as declines were noted in three of the nine sectors tracked. Losses were minimal while consumer services led advancers with a sharp 5.60% move higher. Retailer Metro led the sector higher as an upgrade to ‘overweight’ from ‘neutral’ by JPMorgan sent the firm’s shares up 8.19%. Lagging further behind was Commerzbank with a 4.62% gain following BNP Paribas’ positive earnings and optimism in banking as investors await potentially grim US Stress test results on 19 financial institutions in the world’s largest economy. The biggest lagger on the day was Adidas with a 4.43% fall as Cheuvreux downgraded the firm.
[B]IBEX 35 9,229.00 +92.30 +1.01%[/B]
Spain’s main index saw a rise of just over one percent with gains in nearly all sectors and a small fall of 0.40% in basic materials. Gains were minimal however with no sector seeing a gain of two percent or more. Insurer Mapfre and natural gas supplier Gas Natural SDG led advancers with greater than four percent moves on the day. Also continuing to move higher was wind turbine maker Gamesa with a 4.12% gain. Spain’s economy showed a large contraction in industrial output and the country remains in a difficult recession with unemployment at the highest in the Euro-Zone.
[B]S&P/MIB 20,104.00 +419.00 +2.13%[/B]
Italy’s leading index posted the largest gain of the five majors with a move of over two percent as eight of the nine sectors rose on the session. Basic materials led advancers with a 5.98% gain followed by greater than 3% moves in consumer services and financials. Oil-field services contractor Saipem led the rise in equity markets with a sharp move of 8.07% following a positive quarterly report and oil rising above $56 per barrel. Also seen moving higher was Banco Popolare with nearly 8% gain as Bank of America raised its price estimate for the stock. Banks Unicredit and Intesa led the index point advances as confidence in the banking sector remains high following BNP Paribas’ earnings.
