European indices ended the week on a strong note and pared year-to-date losses on uplifting fundamentals and confidence in the banking sector. Releases today included German trade which showed exports rising for the first time in six months.
Europe Session Key Developments
• Financials and Manufacturing Lead Rally
• Revenue Climbs as RBS Reports Q1 Loss
• German Data Lifts Markets
European Stocks Pare Year-to-Date Losses on Weekly Gains from Financial Rally and Trade
European indices ended the week on a strong note and pared year-to-date losses on uplifting fundamentals and confidence in the banking sector. Releases today included German trade which showed exports rising for the first time in six months and industrial production showing no change following six consecutive declines. Across the ocean, US data showed narrower job losses in April while Canadian unemployment surprisingly fell, following the trend seen earlier this week in Australia. At the same time, the Canadian housing market showed further weakness while housing around the world continues to contract. On the earnings front, the UK’s Royal Bank of Scotland posted a large quarterly loss while investors reacted positively to the firm’s 27% rise in revenue. Also, Germany’s Commerzbank posted a larger-than-expected loss in the first quarter as writedowns grew and loan-loss provisions were increased. Yesterday, the US government released the results of its much anticipated stress tests on 19 institutions in the world’s largest economy. The release showed that 10 firms would need to raise $74.6 billion and several including Morgan Stanley, Wells Fargo and Bank of America, are already in the process of raising capital through stock/bond offerings and preferred share conversions. Sentiment remains high that banks will be successful in avoiding further government control or nationalization. Investors also remain positive on trade and confidence is growing that large nations such as Germany, which develop heavily on trade, will see more improvement in the months ahead.
FTSE 100 4,462.09 +63.41 +1.44%
The UK index closed higher by more than one percent, the smallest gain of the five majors today. Financials led advancers with a 3.05% move as banking firms rose following the US stress test and RBS rose nearly 14% on a strong increase in revenue despite a net loss of £857 million in the first quarter. Also rising sharply was broker Icap with an 8.58% and zinc producer Vodanta seeing a 8.42% gain in its shares. Mining firms including Kazakhmys and Antofagasta saw significant moves as well as metals continue to rise on the prospects for strong future demand. Despite the gains present, more than 30% of the index posted declines led by a sharp 9.42% drop in British land, followed by an 8.13% fall in property group Liberty International and 5.91% in Land Securities Group.
CAC 40 3312.59 +61.07 +1.88%
The French index rose nearly two percent as nine of eleven sectors rose and basic materials rallied with a 5.31% gain trailed by greater than two percent moves in utilities and oil & gas. More than 30 of the 40 stocks that make up the CAC gained today as lender Dexia led advancers with a 7.76% move higher. Also continuing to rise was Air France which rose 6.60%. Despite the strength, several large firms saw declines on Friday including a 4.05% fall in STmicroelectronics and a 2.56% drop in automaker Renault as BMW reported a 24% drop in April sales.
DAX 4913.90 +109.80 +2.29%
The German index saw a significant move of more than two percent to help the DAX close just below the 5,000 level. Utilities and Industrials led advancers with greater than three percent gains on the day along with moves in excess of two percent seen in four other sectors with just telecom declining a miniscule 0.12%. The German economy, which is still expected to contract in 2010, has seen some signs of improvement in recent data. Exports rose in March for the first time in six months while industrial production showed no change following six consecutive monthly declines. As demand picks up in China and other parts of the world, it is possible that Germany, which relies on nearly half its GDP from trade, may recovery sooner than anticipated. Steelmaker ThyssenKrupp led advancers on the day with a 5.93% gain followed by health care group Fresenius rising 5.71% and greater than 4% moves in Allianz, Deutschebank and others. Lagging the index was automaker BMW with a 3.96% fall as the firm said April sales fell 24%.
IBEX 35 9408.10 +179.20 +1.94%
Trading in the Spanish market led to a nearly two percent gain as nearly all sectors rose and telecom fell just 0.20%. Financials and basic materials led advancers with sector gains of more than three percent for each. Leading with a 7.02% gain was television station operator Gestevision Telecinco following a share-price upgrade to the firm’s stock at Morgan Stanley. Also seeing considerable was builder Obrascon with a 6.15% gain. Banking shares of Santander rose 4.70% and led the 179.20 index point move in the IBEX along with Banco Bilbao which saw its shares climb 3.13% on the session.
S&P/MIB 20,509.00 +695.00 +3.51%
The Italian market saw the highest move on the session which led to a close above 20,000 as the financial rally continued throughout Europe. The financial sector makes up nearly 48% of the weight in the Italian index and the sector posted an impressive 5.70% gain today as firms such as Banco Popolare rose 11.20% on estimate upgrades from JPMorgan and UBS. Rival bank and largest in Italy, Unicredit, saw its shares climb 8.87% as well. Also seeing considerable upside was the consumer goods sector which gained 3.48% on Luxxotica’s 10.14% move. The world’s largest eyewear maker reported lower profit than analysts had expected but commented that sales were improving.