European Markets, Fundamentals

European Markets Close Higher Follow Volatile Session

Europe Session Key Developments

•    Crude Lower on Stockpiles, Dollar Strength
•    Financial Risk Easing on Dubai Fallout
•    Low Volume of Indicator Event Releases

European markets ended the session higher following a mixed trading day with no degree of direction for much of the day. Pressure on stocks included lower commodity prices with crude down approximately two percent, while dollar strength led to declines in other metals as well. Elsewhere, event releases proved minor with UK construction PMI posting a narrower contraction while Euro-Zone producer prices posted a light gain as inflation remains subdued. Continuing to weigh on sentiment is talk of Dubai World beginning plans with banks to restructure its debt load, now estimated at approximately $29B that will see discussion. This indeed has eased tension, following early reports last week that speculation debt of as much as $80 billion in question. Ultimately, stocks rising for a second day has put off some of the pressure seen in the final days of the previous week, though several key releases could affect trading in the final days this week. Chief among these would include updated third quarter figures for the Euro-Zone, not expected to change from the advanced reading, while the ECB rate decision could bode poorly for equities if the Trichet’s tone appears to shift in a more hawkish direction. Finally, on Friday US job loss figures for the November will be released, where traders expect fewer losses with the unemployment holding steady. Any sharp divergence in these major releases could set precedent for significant volatility in the coming days.

FTSE 100                      5,327.39                   +15.22               +0.29%
British stocks ended higher for a second session following volatility through much of the day. Ultimately carrying stocks was diminished fear over Dubai’s debt restructure plans, while the financial sector continued to remain a concern, down 0.40% as Credit Suisse remained pessimistic on UK banks. Overall, nearly two-thirds of stocks rose along with seven of ten sectors with Technology and Telecom up more than two percent each while miners led the upside with platinum producer Lonmin up 3.24% while Rio Tinto, Vedanta and others gained more than two percent as well.

CAC 40                     3,795.92                  +20.18                 +0.53%
French stocks ended higher following caution and a tight trading range through most of the session. Prevailing to give the index the highest gain of the five majors were upside of more than one percent across four sectors while winners outnumbered losers 3:1. Luxury goods maker LVMH climbed the most at more than 3% on news it plans to expand the business of watchmaker Sincere. Overall the French economy appears to be growing at a quicker pace than its large neighbors, as recent PMI data has shown. This should bode well for continued optimism in equities.

DAX                         5,781.68                  +5.07              +0.09%
German equities rose slightly as losses of more than one percent in Financials and 2.95% in Technology dragged on the index. Just over half of stocks managed to gain with none moving two percent or more to the upside. On the other end, Oracle rival SAP fell 3.24% on news prices won’t be raised for Austrian clients in 2010. Other major laggers included Commerzbank and Volkswagen, both down more than two percent.

IBEX 35                     11,868.80                   +6.70                +0.06%
Stocks in Spain rose modestly with gains in four of nine sectors while just over 50% of stocks fell. Major gains proved difficult to find, while Telefonica led the index move with a rise of 0.64%. On the downside included insurer Mapfre down the most at more than two percent. Overall the market is up the most of the five majors this year with a 29% gain, reflecting the strong recovery speculation in Latin and South America, a significant revenue source for many of Spain’s largest companies.

FTSE MIB                        22,572.88                    +16.83                  +0.07%
Italy’s benchmark index closed slightly higher to gain for a second day while sharp volatility sent stocks mixed throughout the session. More than half of stocks rose while several major firms closed lower. Among them were automaker Fiat, down 0.29% and Italy’s largest bank, Unicredit, which fell 0.74%. On the leading edge were several firms up more than two percent including pipeline operator Snam Rete Gas and eyewear maker Luxottica.

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