European Stocks Diverge as International Monetary Fund and Economic Readings Indicate Further Contraction

Published April 23rd, 2009 - 09:49 GMT
Al Bawaba
Al Bawaba

European equity markets showed indecision as previous IMF forecasts outweighed Credit Suisse’s unexpected earning profits and economic readings continue to be dismal.

Europe Session Key Developments

• Credit Suisse’s Better-Than-Expected Earnings Overshadowed by IMF Forecasts
• Low Business Sentiment and Decline in Industrial Orders Paints Dour Outlook

European equity markets showed indecision as previous IMF forecasts outweighed Credit Suisse’s unexpected earning profits and economic readings continue to be dismal.  Following a number of banks scheduled to release their first quarter statements, Credit Suisse posts an unexpected earnings report due to an increase in trading revenue, beating forecasts on the street.  The Swiss bank also makes no indication to cut dividend payments, displaying a sign of stability compared to other financial institutions.  However, the news was unable to drive a rally in European equities as previous warnings of economic contraction and global credit losses from the International Monetary Fund weighed down on bullish sentiment.  Additionally, with the stress tests conducted by the US scheduled to release on May 4th, investors remain wary of a recovery in the financial sector until there is more clarity in the markets.  Taking a look at macro economic drivers, business sentiment across the Euro-Zone in manufacturing and services continue to reflect an economic recession.  With low consumer consumption and a decline in industrial demand, business sentiment will likely remain at low levels.  In turn, companies will continue to cut production, creating a dour outlook for business and economic recovery.

FTSE 100                      4,018.23                   -12.43               -0.31%
The FTSE closed with minimal change with Technology climbing 4.74% higher but balanced by Health Care, Financials, and Telecommunications dropping 2.19%, 2.25%, and 2.28%, respectively.  Schroders, U.K.’s largest publicly trading money manager led the Financials sector down by falling 6.92%.  The company drop was due to lower earnings and capital withdrawals from investors.  Rolls Royce was also a major loser, declining 4.03% after Cazenove changed the company’s rating to “underperform” from “in-line.”

CAC 40                     3,008.62                   -16.62                 -0.55%
France’s leading index had a slight loss as Oil & Gas was the only sector with gains over 2%.  Telecommunications, Basic Materials and Health Care all closed with over 2% losses.  Schneider Electric, world’s biggest maker of circuit breaks, rose 2.96% after 1Q sales matched street estimates and a program to cut costs was implemented.  Some of the top losers included Alcatel-Lucent and Sanofi-Aventis, falling 4.48% and 6.22%, respectively.

DAX                         4,538.21                    -56.21             -1.22%
German equities had the largest drop out of the major indices with all sectors closing in the red except Technology with a 1.99% gain.  Industrials and Financials both had had losses above 2%.  Some of the biggest losers, leading the index lower was RWE, Germany’s second-largest utility company and Munich RE, world’s second-largest reinsurer with 9.01% and 8.68% losses.  Leading the Technology sector higher was SAP, world’s largest maker of business-management software with 1.99% gain.

IBEX 35                     8,769.20                   -64.90                 -0.73%
The IBEX edged lower with all sectors closing in the red except for Health Care and Industrials, gaining 1.78% and 0.11%.  Only Financials and Health Care sectors closed with a movement more than 1%.  Banco Santander and Banco Popular Espanol were a few of the biggest losers today, with 2.4% and 1.6% declines.  Obrascon Huarte Lain, rose 4.04% despite announcing the value of their highways fell 16.1%.

S&P/MIB                        18,145.00                    +59.00                  +0.33%
Italy’s leading index was the only index that closed in the green as Consumer Services rose 1.54%.  However the gains were weighed by Telecommunications and Basic Materials with 1.07% and 1.62% losses.  Pirelli & C, Europe’s third-largest tiremaker was a big winner with 6.10% gains as Unicredit upgraded the company from “underweight” to “neutral.”  Lottomatica was also a big winner, climbing 3.89% higher as the government announced an increase in research towards the gaming sector.

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