European Markets, Fundamentals

European Stocks Edge Higher Following Volatile Session

Europe Session Key Developments

• Commodities Lower amid Greenback Decline
• Growth and Earnings Improve

European stocks closed slightly higher following a volatile session as commodities moved lower while fundamental data failed to meet analyst estimates. The main driver on the session was expected to be the third-quarter GDP results for the Euro-Zone, which posted slightly below expectations. Ultimately other drivers carried the trade as commodities moved lower while earnings results from major firms failed to solidify sentiment in one direction or another. While equity markets closed up two to four percent this week, the bulk of the move came early in the week while cautious optimism lingered in recent sessions. Today proved no different as traders gauge whether new highs will be set in the near-term. Activity in the US showed a clear breakout to new highs, but that move has also pared back slightly as concerns remain a factor. Data on confidence in the world’s largest economy echoed that notion as consumers felt less sure of the outlook on growth, an outcome that may hinder recovery in sales. Overall, markets have seen considerable gains since the start of November and sidelined liquidity may have indeed filled the void created by the late October sell-off. At the same time, caution should be high as equities remain off recent peaks, while further cracks in confidence and other measures could bode poorly for the months ahead. As central banks begin to pull back on emergency actions, including the ECB’s planned final loan auction in December, it will be important to see whether the market fills the gap on its own and whether lending growth will resume.

FTSE 100              5,296.38          +19.88                 +0.38%
British stocks ended the session higher by more than three-tenths of a percent as caution continued with minimal moves for the sector and most stocks. Only the Utilities sector gained more than one percent. Liberty International rose the most at nearly four percent followed by British Land up 2.79% following a report that showed commercial property recovering at a fast pace in the past month. Most stocks rose while over a third of the 102 member index declined. Ultimately the index has gained in seven of the past eight sessions of trading but has shown considerable volatility in recent days following a large rise on Monday. While the FTSE has closed at a fresh high for the year, it remains below recent intra-day highs.

CAC 40                3,806.01               -2.06                  -0.05%
Stocks in France closed lower with Oil & Gas leading with a drop of 1.86% while only Consumer Services posted a gain of more than one percentage point. Ultimately leaving the mood sour were third-quarter GDP figures which showed slight growth in the quarter at half of what analysts had expected. Despite this, the economy did in fact continue to grow, and economic recovery bodes well for improving weakness in trade. The CAC40 has rallied more than seven percent off its recent bottom, but failure to set a new high leaves investors uneasy.

DAX                       5,686.83              +22.87               +0.40%
German equities rose the most of the five majors as nearly all sectors advanced, with the exception of utilities, as German GDP rose in the third quarter by seven-tenths of a percent. While the figure proved slightly lower than analyst estimates, the economy is starting to recover and recent revisions to growth projections as trade increases will likely to continue benefiting multi-national firms. Most stocks posted small gains with only one firm rising more than two percent while Commerzbank and Volkswagen fell the most at 2.58% and 1.85% respectively

IBEX 35                  11,867.00            +32.50                 +0.27%
Spanish stocks climbed more than a quarter of a percent as seven of nine sectors advanced while gains proved limited to moves of just over two percent in either direction. Ultimately more than 60% of the 35 stocks tracked posted in the green while the index closed at its highest in weeks, despite not establishing a new intra-day high. Spain’s economy contracted 0.3% in the third quarter, while neighboring Italy, Germany and France all posted growth. While this should translate into apparent weakness in the region, stock prices remain strong as many of the nation’s top firms depend on revenue in Latin America and across the Atlantic.

FTSE MIB               23,284.20              +74.73               +0.32%
Italian stocks closed higher amid growth in the Italian economy for the first time in six quarters. Ultimately, the heavily financial weighted index has rallied to close nearly seven percent above its recent lows. At the same time, the intra-day high set on Wednesday at just below 23,400 marks the key 61.8% retracement of the drop in October. Overall, traders remain concerned whether economic recovery will continue with the rapidity seen in the third quarter as government efforts to aid in growth are starting to stall out. Spending remains weak while job losses continue to mount, adding to lending pressure.

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