Central European stock markets were closed as nations celebrated Labor Day while the UK index showed little change on the session. Improving economic conditions sent commodities higher while concerns over financials increased.
Europe Session Key Developments
• Commodities Rise on Recovery Prospects
• Indicator Releases Point to Improving Conditions
• US Stress Test Results to be Delayed
Mainland European Markets Closed for Labor Day While UK FTSE Little Changed
Central European stock markets were closed as nations celebrated Labor Day while the UK index showed little change on the session. Improving economic conditions sent commodities higher while concerns over financials increased as the US government plans to delay stress test results for several days. Data from nations abroad showed positive improvements as China’s PMI rose for a fifth month to 53.5, signaling manufacturing expansion for the second month, while US confidence and manufacturing continued to improve. In Europe meanwhile, indicators released earlier in the week including a rise in confidence helped led the Dow Jones Stoxx 600 index to its highest monthly gain since the recording began in 1987. European markets have largely erased year-to-date losses and further upside may continue as financial fears remain in check by positive earnings. The Libor-OIS spread, a measure of lending, has declined to the lowest level since early September at 1.01%. Risk appetite is set to continue rising in equity markets as traders eye increased lending and further improvements in indicators for signs of growth in the second half of 2009.
FTSE 100 4,243.22 -0.49 -0.01%
The UK’s index was open for trading today but showed nearly no change as nearly half of the index closed lower. Gains of more than two percent in technology and basic materials were tempered by declines in financials, consumer goods and health care. Concern remains high in the financial sector as the US plans to delay the stress test results of its major banks while traders take profit following large upside moves in the previous months. Despite the risk, Royal Bank of Scotland saw its shares rise 5.26%, the second highest gain on the index, as buying continues following recent upgrades to the banking sector and Morgan Stanley’s expectation for a smaller net loss for RBS in 2009 than previously expected. Leading gains in general was the basic materials sector with Kazakhmys rising more than 10% and Xstrata moving higher by 5.10%. The firms saw upside following positive reports on increased output of copper and other base metals. Kazakhmys went further in adding that demand from China was above expectations. Commodities have seen upside in the past two days as data indicates that the world economy may be improving. Expansion in China’s PMI and improving global confidence is setting the stage for recovery in the second half of the year.
