European equities closed off the volatile session with modest declines as unexpectedly positive economic releases collided with mixed earnings reports. Although the UK manufacturing year over year shows the biggest drop since the series began in1949, the month’s reading showed an unexpectedly better decline of only 0.1%.
Europe Session Key Developments
• Better Than Expected Releases Prop Up Equities In Early Trading
• Mixed Earnings Reports Lead To Greater Risk Aversion
• Financials Remain Weak, Prospects For Future Remain Unclear
European equities closed off the volatile session with modest declines as unexpectedly positive economic releases collided with mixed earnings reports. Although the UK manufacturing year over year shows the biggest drop since the series began in1949, the month’s reading showed an unexpectedly better decline of only 0.1%. The release adds to a growing list of slightly positive data that show some signs of possible stabilization in the economy. Other companies meanwhile showed better than expected results. Both may suggest a more positive outlook for the economy but investors looking to peg these releases as sure signs of a bottom may be a bit too hasty. A reversal will ultimately depend heavily on the health of the financial sector. In this regard, financials remain in a weak state and retain significant exposure to assets that could erase gains of the recent quarter. In the current climate, these losses pose greater risk of loss, and ultimately reversing any positive developments in the credit markets. If that happens, the market could revisit another credit crunch and derail a turnaround. Investors are likely eying Friday’s release of the Euro-zone GDP report to see if the recession has deepened further. Given the ECB’s expectation that it has, equities will likely shift sentiment toward the downside and pare some of the quarter’s gains.
FTSE 100 4425.54 -9.96 -0.22%
A much better than expected manufacturing production release (only declining 0.1%) for the month helped buoy stocks in earlier trading. Some of this strength was mitigated by an unemployment report that showed the largest increase since the 1981 recession. Although some sectors maintained gains, declines in financials and basic materials sectors of over 3.4% and 3.60% respectively pulled back the index for a modest decline for the session. Major financial movers by volume were RBS, which declined 5.64%, Lloyd’s banking which declined over 10.27% and Barclays declining 6.45%. All other sectors exhibited strength with Telecoms and Health Care leading the way. The Health Care center gained 2.5% while the Telecom sector gained over 2.89%, as Vodafone traded up by 3.22%.
CAC 40 3231.10 -17.57 -0.54%
The French Index also showed modest declines. The European Aerospace Group, makers of the Airbus line of airplanes, showed a 70% decline in revenue for the quarter, declining over 3.25% for the day. Other major decliners by volume were Arcelor Mittal, which declined 4.26% on concerns of further weakness in commodity demand, and Vivendi, which declined 6.48% on concern tighter spending concerns. The Financials and Consumer Service Sectors showed the most weakness, declining over 2.4% and 2.21% respectively. The Telecom sector showed the most strength as France Telecom gained 2.65% for the session.
DAX 4854.11 -12.80 -0.26%
Consumer price growth showed a rebound off its lowest level today rising up to 0.7% for the month, suggesting further weakness in the economy. Some weakness was seen in the Industrials and Consumer Goods sectors, which declined 1.39 and 1.29% respectively. ThyssenKrupp AG declined over 6.43% as the company announced that it expected a full year loss before taxes somewhere in the “mid to high-three digit million euro” range. Weakness was offset by strength in the Telecom buoyed by Deutsche-Telekom, which gained 2.09%, and Health care sectors, which gained 1.08%
IBEX 35 9269.00 -47.80 -0.51%
Weakness in Telecoms, Financials and Basic materials pushed the index slightly down. The three sectors declined 2.37%m 1.27%, and 1.10% respectively. Banco Santander declined over 1.37% after the bank’s CFO announced it was not looking into acquisitions, but would finance purchases of Italian Solar Parks. Banco Bilboa Vizcaya Argentina also declined 1.14%. Weakness was offset by gains in Consumer Services sector which gained over 3.05%.
S&P/MIB 20337.00 +137.00 +0.68%
The Italian Index was the only index to show modest gains today. Strength was led by an impressive gain of over 4.5% in the Telecom sector, pushed up by Telecom Italia’s gain of 4.67%.Weakness was seen in the Technology, Financial and Consumer Services Sectors which showed declines of 0.8%, 0.4%, and 1.04% respectively. Some major movers by volume were Unicredit Spa with a decline 0.94%, Fiat Spa which gained 3.05% after announcing further details of its restructuring plan with Chrysler.
