European markets closed with uncertainty as stress test results are expected to be handed over to executives while Bernanke addressed the public regarding test outlook and the European region released mixed economic readings.
Europe Session Key Developments
• Federal Reserve Expected to Release Stress Test Results to Bank Executives
• US Fed Chairman Ben Bernanke Asserts Banks Require No Further Government Funding
• Mixed Readings from a Short List of Economic Events
European markets closed with uncertainty as stress test results are expected to be handed over to executives while Bernanke addressed the public regarding test outlook and the European region released mixed economic readings. Following a decision to push the stress test release date back from Monday, the Federal Reserve gives bank executives a first look at the results before they will be published on Thursday to the public. However, the report may not bear good news for all 19 banks tested as market participants speculate that approximately ten banks will require additional capital, with primary focus on Citigroup and Bank of America. Over a testimony before the Joint Economic Committee, US Fed Chairman Ben Bernanke asserts that although some banks may find it necessary to increase capital, many financial institutions would not need additional funding from taxpayer’s money. In terms of economic recovery in the US, the policymaker stated that barring a significant financial crisis or deterioration in financial condition, the economy should see a slow recovery by the end of the year. Looking into the short economic docket in the European region, consumer confidence continues to decline in Switzerland, marking the lowest level since January 2003. On the other hand, sentiment in the construction sector unexpectedly jumped to 38.1, while economists were forecasting a 31.9 reading. With mixed economic readings and heavy anticipation for the official stress test release, markets will require more clarity before any direction can be determined.
FTSE 100 4,336.94 +93.72 +2.21%
The FTSE rallied to realize the same gains other major European indices had yesterday while UK equities were closed. Financials, Basic Materials and Industrials led the index higher with 6.65%, 2.90% and 2.20% gains, respectively. Standard Chartered, a UK bank that earns most of its profit in Asia boosted the financial sector with a 8.49% rally as the bank announced significant earnings and revenues in the first quarter. Royal Bank of Scotland also jumped 9.09% after news that the Finance Director Guy Whittaker will be resigning, one of the directors linked to RBS’ record loss.
CAC 40 3,225.00 -12.97 -0.40%
France’s leading index saw minimal loss with all sectors closing in the red except Financials and Basic Materials. Alstom was one of the biggest losers with a 4.46% drop after CEO Patrick Kron announced plans to cut costs for the firm. Cap Gemini, Europe’s largest computer services company was also one of the top losers for the day with a 6.01% decline. Societe Generale led Financials higher with a 8.20% gain after Bank of America changed their rating for European financial services to “neutral.”
DAX 4,853.03 -49.42 -1.01%
German equities closed with the largest drop in price with all sectors posting a loss in the DAX. Health Care and Technology dragged the index down with losses over 2%. Adidas, world’s second-largest sporting goods maker fell 11.19% as 1Q net income dropped 97% to €5 million as demand diminished for goods. Metro AG, Germany’s largest retailer also fell 3.8% as the company announced a 1Q loss of €100 million due to weak sales.
IBEX 35 9,136.70 +62.00 +0.68%
Spain’s stock market had marginal gains with Financials and Consumer Services carrying the leading index higher, but balanced by Health Care dropping 1.95%. Cintra Concesiones de Infraestructuras de Trasnporte, Spain’s largest toll-road operator was the top winner in the index with a 7.19% gain as the company posted an unexpected first 1Q profit of €12 million due to increased traffic on the Chicago Skyway. Spanish builders Grupo Ferrovial and Obrascon Huarte Lain rose 5.04% and 4.14% as Obrascon announced plans to increase sales and net income.
S&P/MIB 19,685.00 -107.00 -0.54%
Italy’s leading index fell slightly for the day with all sectors posting losses except Consumer Goods and Consumer Services. Basic Materials, Telecommunications and Oil & Gas led the sector lower with 2.85%, 1.84% and 1.6% losses, respectively. Luxottica, world’s biggest maker of eyeglasses was one of the top gainers today with a 4.27% jump as company management has made indications of improved demand for their products.
