European Stocks Remain Undecided despite Weak Economic Data
European markets ended another trading session with indecision despite a list of European GDP readings indicating a contraction in economic activity; meanwhile US insurers get their turn to receive government funds through the Troubled Asset Relief Program.
Europe Session Key Developments
• GDP Readings Indicate Euro Region Falling Deeper into the Recession
• TARP Funds Made Available to Insurance Industry
European markets ended another trading session with indecision despite a list of European GDP readings indicating a contraction in economic activity; meanwhile US insurers get their turn to receive government funds through the Troubled Asset Relief Program. A consistent event we saw today were members of the Euro-Zone posting an economic contraction far worse than anticipated by economists. Germany’s economy had the largest quarterly contraction in at least 40 years while the France’s economy continued to shrink for the fourth straight quarter. The bearish readings led economic activity to shrink in the Euro-Zone by a record 2.5% for the first quarter while surveys forecasted only a 2.0% decline. However, the economic deterioration across the Euro region proved to be ineffective at pushing markets lower since major indices remained at levels similar to yesterdays close. Now to take our attention away from lagging economic indicators, six US-based insurers were granted government funds through the TARP as banks scurry to repay their capital infusion from the same program. The insurers however accept the bailout funds with open arms as an increase in their capital base will raise confidence in the institution’s ability to honor their insurance obligations. Combined with the optimistic speculation of economic recovery in the US, the extra confidence may lead to a boost consumer spending, in turn improving demand for exports.
FTSE 100 4,348.11 -14.47 -0.33%
The FTSE closed the day with a slight drop as the only two sectors able to post gains were Basic Materials and Industrials with 1.64% and 1.25%, respectively. Telecommunications and Health Care helped led to index lower with losses over 1% each. BT Group was the top loser for the index with a 3.85% drop, followed by Standard Life with a 3.64% decline. Experian was one of the top gainers, rallying 3.82% after JPMorgan Chase changed the credit-checking company’s rating to “overweight.”
CAC 40 3,169.05 +12.76 +0.40%
France’s leading index saw marginal gains with only Telecommunications, Technology and Health Care closing in the red. Basic Materials helped lead the index higher with a 2.27% gain. Societe Generale was one of the top gainers for the index, rising 2.57% as Bank of France announced Societe Generale’s ability to pass ‘stress tests.’ Cap Gemini and Alcatel-Lucent were a few of the day’s losers as the companies fell 3.43% and 1.95%, respectively.
DAX 4,737.50 -0.97 -0.02%
German equities edged slightly lower with Health Care and Telecommunications dragging the index lower with more than 1% loss each. There were no sectors that had more than a 1% gain. Commerzbank gained 2.80%, helping the Financials sector rise 0.92% as CEO Martin Blessing announced the bank will no need additional capital from the government. He also guaranteed limited government control over the bank. Linde, a maker of industrial gases was one of the day’s biggest losers with a 2.10% decline.
IBEX 35 8,978.60 -5.60 -0.06%
Spain’s stock market closed the day with a small loss with Technology posting a jump in gains of 6.09%. However, the advance was countered by Health Care and Consumer Services falling 1.29% and 1.58%, respectively. The gain in Technology was due to Indra Sistemas as the computer services company posted 1Q earnings of 46.5 million euros. Gamesa also gained 5.25% after Goldman Sachs changed its price estimates from 18 euros to 19 euros.
S&P/MIB 19,548.00 +277.00 +1.44%
Italy’s leading index had the most gains out of all the major indices as Technology and Basic Materials led the index higher with a 3.44% and 2.52% gain. The only sector that closed in the red today was Consumer Services with a -0.88% loss. Parmalat was one of the gainers, rising 8.20% as 1Q profits jumped to 176.3 million euros. Intesa Sanpaolo was also a top gainer with a 7.36% advance as Cheuvreux changed the bank’s rating to “outperform.”