European markets closed on session highs despite weak domestic fundamentals and a dour European Commission report. The large upside came as China and India posted expansion in their PMI data which boosted prospects for future demand.
[B]Europe Session Key Developments
• Expansion Abroad Raises Manufacturers
• Markets Begin to Pare YTD Losses
• European Fundamentals Remain Weak[/B]
[B]
European Stocks Rally Higher on Manufacturing Strength[/B]
European markets closed on session highs despite weak domestic fundamentals and a dour European Commission report. The large upside came as China and India posted expansion in their PMI data which boosted prospects for future demand. The European Commission today revised its earlier estimates of 1.9% contraction in 2009 to a 4.0% fall in GDP with expectations for a 0.1% decline in the following year. Also adding to the downside risk was a surprising decline in German retail sales and a lower than expected reading of the Sentix Investor Confidence indicator. Despite the releases, Euro-Zone PMI rose slightly and releases abroad helped to keep traders optimistic. China and India both posted PMI data above 50 in April, signaling that two significant BRIC nations may raise demand. Later in the session, US data releases surrounding the housing market and construction surprised to the upside. Markets broke higher following the news and ended the day near the top of the range. It appears that the rally which began in early March may be continuing into the third month despite concern that this may still be simply a bear-market rally. Also of note, several indices today pared year-to-date losses and broke into minimal gains.
[B]FTSE 100 4,243.22 [/B]
London markets closed for May holiday.
[B]CAC 40 3,237.97 +78.12 +2.47%[/B]
The French sector rose more than two percent on the session and closed with a small YTD rise as all sectors rallied with the exception of telecom. Basic materials rallied 7.38% as PMI data from India and China boosted prospects for demand in commodities and other goods. ArcelorMittal, the world’s largest steelmaker, led advancers with a sharp 12.56% gain trailed by an 8.51% move in Air France as swine flu fear eases. Also seeing significant gains on the day was pipe builder Vallourec with a 7.20% rise in its shares as well as a 6.84% gain in Renault as optimism in the auto markets continues. France remains one of the strongest economies in western Europe and a recovery in demand would help the nation minimize contraction.
[B]
DAX 4,902.45 +133.00 +2.79%[/B]
Trading in the German market led to a move of nearly three percent and helped the index to post the best YTD gain so far with a 1.92% rise so far in 2009. Optimism was high as all sectors rose with the exception of health care and four sectors posted moves in excess of 4.0% on the day. Leading gains was German steelmaker ThyssenKrupp with an 8.31% while fellow steelmaker Salzgitter also posted a gain of 6.84%. Also seeing sharp upside was reinsurer Hannover Rueckversicherung with an 8.30% move as Fitch reaffirms the company’s A+ rating despite cutting its outlook to negative from stable. Despite the upside, Deutsche Telekom fell a sharp 7.66% as reports circulated that the firm may sell or merge its UK mobile service unit. The heavily export dependent nation is recovering quickly as demand is seen accelerating from China and other rising economies. As China’s stimulus package continues to take effect, the German economy may continue to see improvement.
[B]
IBEX 35 9,074.70 +36.70 +0.41%[/B]
Spain’s leading index closed up slightly on the session due to greater than two percent gains in industrials and telecom and positive moves in all sectors but financials. Wind turbine maker Gamesa has seen significant volatility in recent weeks and today led advancers with a sharp 14.04% move higher followed by a 9.28% gain in engineering firm Abengoa. On the downside was shares of Banco Santander, which fell 3.99% on the session as concern lingers as to what effect a longer recession in Mexico will have on the bank’s profit. Spain’s economy remains in a very difficult situation with political tension and the highest unemployment rate in the EU at just over 17%. Global rallies have helped the stock market has helped the IBEX close above 9000 but the relatively smaller move may be a hint of weak investor confidence ahead.
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S&P/MIB 19,792.00 +615.00 +3.21%[/B]
Trading in the Italian market led to the highest gains of the five major indices tracked and nearly pushed the index above 20,000. All sectors rose on the day with several seeing upside in excess of five percent. Leading gains was holding company CIR with a 14.69% gain following the company’s twelve percent rise in first quarter earnings. Also leading was automaker Fiat which rose 8.05% as the company plans to see significant change if it concludes its talks with Chrysler and also purchases GM’s Opel Division in Europe. Investors have been flush with confidence in the Italian markets and firms across all fields continue to see upside for the third month.
