European Markets, Fundamentals

European Stocks Decline as Equities Overbought and Asian Market Falls

Europe Session Key Developments

• Commodities Fall on Asia Concern
• Light Trading day on Indicators/Holiday

European Markets resumed declines with stocks appearing to form a temporary top as correction appears likely on expensive valuations. Asian equities fell prior to the open with the Shanghai composite down nearly seven percent as investors selling shares of Chinese stocks as concern grew that curbed lending will reduce growth in the nation. Commodities suffered as a result with oil trading back under $70 per barrel while fundamental releases provided little impetus for a lift. The UK market was closed today while indicators came in mixed. On the one hand, Hometrack reported rise in house prices in Britain for the first time in two years. Also, Euro-Zone deflation proved smaller than previously estimated. While it is clear that economies are well on the way to growth in the second half of the year, it remains uncertain whether profits at firms will rise as consumer spending to see significant improvement.

FTSE 100                      4,908.90
The U.K. market was closed for trading on Monday

CAC 40                     3,653.54                   -39.60                 -1.07%
Stocks in France closed lower with losses in all sectors while only five of forty stocks rose. Industrials and Basic Materials suffered the most with respective declines of 1.50% and 1.73%. Overall losses proved minimal with lender Dexia down the most at 3.76% followed by automaker Renault with a similar move of 3.62%. Other large firms also led declines as steelmaker ArcelorMittal sold off 2.84% while insurer Axa dropped 2.49%.

DAX                         4,486.30                    -52.74             -0.96%
German stocks closed down by nearly one percent with weakness in seven of nine sectors and Health Care providing the largest gain at 0.41%. Losses were similar to those in the French market with stocks in a general decline. Fertilizer maker K & S fell the most at 2.4% while steelmakers ThyssenKrupp and Salzgitter fell nearly as much.

IBEX 35                     11,365.10                   -77.60                -0.68%
Stocks in Spain closed with the smallest loss of the five majors as three of nine sectors managed to gain on the day while Basic Materials fell 1.78% and Financials were responsible for the bulk of index point declines. Major firms in the rout included construction firm Obrascon Huarte, down 2.73% following a Fitch rating downgrade last Thursday. Other laggers included ArcelorMittal, down 2.61% while wind turbine maker Gamesa fell 2.18%. Banks look a hit as well with Banco Popular falling 1.44% while BBVA dipped 1.39% and Santander fell just short of one percent.

S&P/MIB                        22,420.43                    -252.11                  -1.11%
Stocks in Italy fell the most as oil prices declined and financial shares that make up the bulk of the index suffered losses. Losing the most was bank UBI, down 4.09% on news that the firm is considering a joint venture in insurance. Major firms seeing a drop included Unicredit down 2.32% and STMicro lower by 2.12%.

Written by Roman Kadinsky, CFDTrading Research
Please send any comments about this report to Rkadinsky@fxcm.com