European markets started the week off slightly lower as optimism begins to fade. Equities have rallied significantly since early March and closed with year-to-date gains in the past week.
Europe Session Key Developments
• Basic Materials Fall on Demand Prospects
• Optimism Begins to Wane on Valuation
European Stocks Fall Slightly as Rally Begins to Cool
European markets started the week off slightly lower as optimism begins to fade. Equities have rallied significantly since early March and closed with year-to-date gains in the past week. The strength has largely been on the back of improvements in the financial sector and declines in the spreads of LIBOR-OIS and credit default swaps that signal a resurgence of lending and optimism. In the previous week, US non-farm payrolls came in better than expected at 539,000 lost versus Bloomberg estimates for 600,000. While such data may signal a bottoming in the US economy and improvement to come, the figure still remained high with more than five million jobs lost since the start of 2008 in the world’s largest economy. In Europe, conditions remain grim as global trade remains poor. Germany, a heavily export dependent nation, has seen significant layoffs and is currently expected to contract in the current and following year. Later this week, first quarter GDP readings for Germany and the Euro-Zone are to be released and the revision to Germany’s advanced reading is expected to show a sharp contraction. Today’s released included Italian and French production declines and sharper year-over-year contractions.
FTSE 100 4,435.50 -26.59 -0.60%
The UK index closed the least of the five majors as four of the ten indices closed higher despite a decline of 2.01% in oil & gas and weakness in several other sectors. Leading decliners was miner Kazakhmys with a 13.62% move lower as commodities came off their recent highs. Not trailing far behind was platinum producer Lonmin with a 9.99% decline following a first quarter loss and news of a share sale. Despite the downward bias, several firms closed positively with security company G4S leading advancers with a 6.34% move on a Deutschebank upgrade followed by energy supplier Centrica with a 6.04% gain as the firm expects earnings to rise.
CAC 40 3,248.67 -63.92 -1.93%
Trading in the French market led to the sharpest decline of the five majors as manufacturing in the nation showed a greater-than-expected decline in March. All sectors fell on the session with financials falling the least at 0.63% and industrials falling 4.18% for the largest slide. Retailer PPR, owner of the Puma line of shoes and Gucci brand, fell the most on the session with a 7.10% move following weaker-than-expected first quarter earnings unveiled last week. Also falling sharply was building materials supplier Cie de Saint-Gobain with a 6.69% decline as the company’s CEO expects the economy to worsen. Others seeing significant downside included airliner EADS and AirFrance. BNP Paribas was the only firm to see its stock trading more than one percent higher as optimism in the firm lingers.
DAX 4,866.91 -46.99 -0.96%
The German DAX closed lower by nearly one percent as nearly all sectors fell with the exception of technology and telecom. Considerable moves of more than two percent were seen in healthcare group Fresenius and and software maker SAP while declines of more than six percent were seen in Commerzbank and Truckmaker MAN group. Commerzbank fell for the first time in eight days as news spreads that the firm is considering a debt sale of as much as three billion dollars. MAN fell as investors remain concerned that conditions may worsen in Europe’s largest economy along with poor demand in the auto market.
IBEX 35 9,316.80 -91.30 -0.97%
Spain’s leading index saw a nearly one percent decline as all sectors fell with the exception of technology. Basic materials and oil & gas fell the most on the session with both sectors moving lower by more than two percent. The leading lagger was ArcelorMittal which fell 4.04% in the Spanish market as commodities fell as optimism over future demand begins to cool. Upside on the other hand was limited to Gestevision Telecinco continued its advance with a 3.28% move to start the week. Overall, nearly 75% of the 35 member index traded lower.
S&P/MIB 20,200.00 -309.00 -1.51%
Italian trading led to a more than one percent decline while the index remained above 20,000. Telecom gained 2.45% and consumer services rose 0.64% while all other sectors fell. Losses scaled from as small as 1.12% in financials to a sharp fall of 5.06% in the technology sector. Sparking the selloff in technology, STMicroelectronics fell 5.06% as UBS cut its recommendation on the firm to “sell” from “neutral” on concerns that revenue growth won’t translate into improving profit margins. Italy’s fourth-largest bank, UBI, fell the most on the session with a 7.14% move as the bank reported an 89% drop in first quarter profit on Saturday.
