European Stocks End Volatile Trading Day at Session Highs

European markets closed the volatile session at session highs as investors overlooked a grim report by the IMF and poor earnings from Morgan Stanley. Equities initially opened higher on financial strength following comments yesterday by US Treasury Secretary Timothy Geithner on banks involved in the stress tests.

[B]Europe Session Key Developments

• Financials Rise on Previous Day Geithner Comments
• Concern Over UK Deficit Worries Investors
• IMF Reports Worse Full Year than Previous Estimate

European Stocks End Volatile Trading Day at Session Highs[/B]

European markets closed the volatile session at session highs as investors overlooked a grim report by the IMF and poor earnings from Morgan Stanley. Equities initially opened higher on financial strength following comments yesterday by US Treasury Secretary Timothy Geithner on banks involved in the stress tests. Geithner expressed optimism that the financial system was in relatively good shape and that firms with problems may see simple solution including conversion of the government’s preferred stock into common and recapitalization efforts. Causing disturbance in the middle of the session was a slew of news that sent stocks temporarily into the red including poor earnings from Morgan Stanley, a UK budget deficit of nearly triple the previous year, and an IMF report with expectations for global contraction and deflation in advanced economies. Raising sharp concern on the mindset of investors are data that showing increasing public financing in the UK and a rise to 69.3% in the debt:GDP ratio for the Euro-zone. Rising debt limits the ability of European governments to provide further stimulus measures if conditions continue to deteriorate. Despite the mix of news, stocks have not given back significantly on gains made since early March and that in itself is a clear indication of investor confidence at the moment.

[B]FTSE 100 4,024.44 +36.98 +0.93%[/B]
The UK index rose the least of the five majors as investors were greeted with a slew of poor data and news. Unemployment rose to the highest in more than a decade while jobless claims coming in better than expected. Borrowing by the British government to finance rising debt continues to increase and the recently unveiled budget deficit is nearly triple that of the previous year. Despite the negativity, the financials and basic materials sectors gained more than three percent at the close and six of the ten sectors ended the day higher. Financials rose following comments yesterday by US Treasury Secretary Timothy Geithner. Nineteen US banks are currently under stress tests by regulators to determine their viability in the downturn and the comments made alluded optimism to the tests expected to be released in early May. Hammerson led advancers with an 11.22% gain followed by British land rising 9.52%. Real estate related firms have surged as US data showed a surprising rise in the house price index for February.

[B]CAC 40 3,021.15 +47.21 +1.59%[/B]
French equities posted a greater than one percent move to send the CAC40 index back above the 3,000 level. Industrials and Financials led the move with more than five percent gains in the sectors. Strength in the housing and construction sector was evident as cement producer Lafarge and construction firm Bouygues posted gains of 12.30% and 8.01%, respectively. Financial sector gains proved less impressive but upside of 5.75% in insurer Axa and 5.38% in lender Dexia added to the gains in the index.

[B]DAX 4,589.39 +87.76 +1.95%[/B]
The german market closed higher by nearly two percent as seven of nine sectors closed higher. Financials rose 4.30% followed by 3.61% in Industrials. Telecom proved the loser on the day as Deutsche telekom fell 3.05% as the company slashed its profit forecast and evaluators including Deutschebank and JPMorgan cut their recommendations on the firm. Also falling significantly was Deutsche Post with a 5.28% as the postal service company posted lower earnings as the recession continues. Gains in the index proved far larger with Commerzbank closing up 9.60% and Truckmaker MAN rising 7.43%.

[B]IBEX 35 8,834.10 +218.30 +2.53%[/B]
Spain’s IBEX gained the most of the five majors as consumer services rose 4.53% while technology and financials both rose 3.99%. Nearly all sectors closed positive with the sole exception of healthcare seeing a two percent decline. Lender Bankinter rose the most on the session with a 7.06% advance as investors await a decent earnings report from the firm on Friday. Also rising significantly was Spanish builder Obrascon Huarte Lain with a 6.39% gain.

[B]S&P/MIB 18,128.00 +440.00 +2.49%[/B]
The Italian index closed higher by nearly 2.5% and returned above the 18,000 level at the close. Sector gains varied with basic materials rising as much as 4.06% and the smallest gain seen in utilities of a respectable 1.13%. Losses on the day were minimal with only six of the forty stock in decline and no firm falling two percent or more. On the upside however were gains of just over ten percent in shares of tiremaker Pirelli and a 7.90% move in restaurant owner Autogrill. Index point gains were led by banks Intesa and Unicredit which both rose more than three percent on the day.