European markets pared earlier losses in the week with a sharp rally in the Friday session of trading. Equities rallied on better than expected fundamental releases, including the German IFO, and earnings from major firms in the US and Europe.
[U][B]Europe Session Key Developments[/B][/U]
[B]• Oil Rallies Back above Fifty Dollars
• Positive Quarterly Results Spur Rally
• European Indicators Come in Better Than Expected[/B]
[B]European Stocks Rally to Close out the Week on Positive Earnings[/B]
European markets pared earlier losses in the week with a sharp rally in the Friday session of trading. Equities rallied on better than expected fundamental releases, including the German IFO, and earnings from major firms in the US and Europe. Indicators released today were mixed and included a sharp 1.9% quarterly contraction in the advanced reading for the UK economy. On the upside was a rise off a 26-year low in the German IFO’s expectations index to 83.9 from 82.6. Investor confidence has risen following global stimulus plans and a sharp reduction in the key rate by central banks. Also showing upside was French consumer spending, which rose 1.1%, and UK retail sales that came in at a surprising gain of three-tenths of a percent. Earnings proved positive today as Italy’s largest oil company, Eni, reported better-than-expected results along with US firms including Ford and American Express. Traders have focused high attention on financials and automakers as the downturn continues and positive results from two large American firms has implications that conditions may be improving and that not all firms are suffering. Elsewhere, commodities including Copper and Oil have also rallied on the session. Optimism remains high that stimulus plans such as China’s will prop up demand for the base metals and investors overall remain positive on government efforts to limit contraction in the global economy.
[B]FTSE 100 4,155.99 +137.76 +3.43%[/B]
Equity markets in the UK closed with the largest gain of the five major indices tracked despite a first quarter GDP reading of -1.9% that came in weaker than estimates. Retail sales on the other hand showed a rise of three-tenths of a percent, opposite of expectations for a contraction. All sectors on the exchange rose, with basic materials seeing a sharp upside of 6.06% followed by oil & gas rising 5.20%. Financials also rose significantly with a gain of 4.61%. Miner Xstrata led advancers with a gain of 14.29% as Cazenove upgraded the mining sector with the firm as its top pick, along with a rise in copper prices. Not far behind was Insurer Aviva which gained 14.21% as financials move higher. The oil & gas sector saw significant upside as well following positive earnings from Italy’s largest oil company, Eni, and a move in the price of crude back above $50 per barrel.
[B]CAC 40 3,102.85 +94.23 +3.13%[/B]
Trading in the French market led to a greater than three percent gain to help the index close higher for the 7th week. All sectors rose with gains of as much as 5.75% in utilities and a respectively move of 0.88% in technology stocks. The French economy remains a relative bright spot in Europe with consumer spending in March up 1.1% and expectations for the economy to contract less than nearby nations Germany, Spain, Italy, and the UK. Leading gains today was EAD, maker of the Airbus line of commercial aircraft, with an 8.78% rise as news circulated that production was on schedule.
[B]DAX 4,674.32 +136.11 +3.00%[/B]
German equities saw upside in every sector that led to a gain of three percent for the DAX index. Leading the rise were greater than four percent moves in utilities, telecom and industrials. Utility E.On rallied the most with a 6.31% gain followed Siemens, Salzgitter and BASF, rising more than five percent each. Positive German IFO data that came in better than expected, along with earnings releases from major multinational firms, gave investors confidence that the largest exporting nation was improving. Also, ECB councilmember Axel Weber spoke earlier with cautious optimism and a personal expectation for a three percent contraction in the current year, well below the IMF World Economic Report for a sharp 5.6% contraction in 2009 GDP.
[B]IBEX 35 8,888.20 +119.00 +1.36%[/B]
Spain’s stock market saw the least gain of the five major as concern rings high on political tension and economic distress. Today’s grim news included unemployment readings for the nation rising to 17.4%. The increase from 13.9% in the fourth quarter marks the highest acceleration in unemployment since the reading was first recorded in 1976. The sharp rise has investors concerned that already grim projections by the IMF, expecting a 3% contraction amid 19.3% unemployment, may in fact be optimistic given the current pace of layoffs. Despite the downside pressure, eight of the nine sectors gained with basic materials up 4.59% and oil & gas rising 3.30%. Consumer services fell 1.95% as airline company Iberia’s shares dropped 8.98% on plans to scrap its dividend. On the upside, engineering firm Abengoa and power company Endesa both saw gains in excess of five percent.
[B]S&P/MIB 18,651.00 +506.00 +2.79%[/B]
Trading in the Italian market led to a nearly three percent rise in the index and upside for eight of the nine sectors while technology stocks fell 1.25%. Oil & gas and basic materials led equities high with greater than five percent moves. Insurance company Fondiaria led advancers with a 9.18% gain as Mediobanca upgraded its price estimate on the firm to €14.4 from €12.0. Also seen rising sharply was defense company Finmeccanica with a 6.80% move as investors raise optimism the firm may win a $35 billion contract with the US. The positive movement today has helped the Italian index post a 7th weekly gain as markets continue to remain optimistic going forward.
