European Markets, Fundamentals

European Equities Advance For Third Day as Commodities Climb

Europe Session Key Developments

•    Mining Companies Trade Higher on Rising Metals Costs
•    Crude Oil Gains For Second Consecutive Session
•    Euro Gains Against Greenback, British Pound Snaps 3-Day Losing Streak

Rising commodity prices led European stocks higher for a third consecutive day, the region’s first three-day winning streak in nearly a month.  Mining stocks led the broad European rally, helping to push the Dow Jones Stoxx 600 Index up 1 percent on the day.  Overall, the index has increased 59 percent since last March as central banks have maintained low interest rates and governments have supplied more than $12 trillion to help stimulate the economy.  The easy-money policies of central bankers have pushed up asset prices around the world- from stocks and commodities to bonds and real estate.  During today’s session, stocks and commodities rose in tandem for a second consecutive day, after the Reserve Bank of Australia surprisingly refrained from raising interest rates.  This helped crude oil surge through $77 a barrel, its highest price since January 21.  Precious metals followed suit, as gold and silver rose 1 percent and 0.2 percent respectively.  The large move in commodities today was mostly based on investor sentiment after the RBA rate decision, as there were no major releases on Europe’s economic docket.  Investors found some encouragement from rising German retail sales in December and a Swiss report that showed consumer confidence beat expectations for January.  Looking ahead, Euro-Zone retail sales and PMI data could move markets tomorrow, but most eyes will be looking ahead to interest rate decisions from the Bank of England and European Central Bank on Thursday.

FTSE 100                      5283.31                   +35.90                    +0.68%
Trading in London today resulted in a 0.6 percent gain as the Basic Materials and Consumer Services sectors added 3 percent and 1 percent respectively.  All twelve basic-resources producers on the FTSE gained today, and the total 3 percent rise was the biggest advance in two months.  Rio Tinto, one of the world’s largest mining companies, gained over 3.3 percent on surging commodity prices and a recommendation from analysts at Citigroup.  British Airways led the rally in Consumer Services, gaining 3 percent on bets that the U.K. airline will be allowed to make controversial changes to cabin crew working practices that could save the company more than 80 million pounds.

CAC 40                           3812.13                   +50.12                    +1.33%
French equities rose for a third consecutive day, led by a 2.2 percent gain in the Industrials sector.  More than four stocks gained for each that fell as the CAC rose to its highest level since January 22.  Oil and gas engineering firm Technip led the index, rallying over 6 percent on news that the company may win orders to build new natural-gas storage sites in Germany.  Closing just behind Technip was Vallourec, the world’s second largest maker of steel tubes for energy production, which benefited from a 3 percent rise in oil prices.

DAX                                 5709.66                    +55.18                  +0.98%
German stocks continued their move higher as Industrials and Consumer Services rallied over 1.6 percent each.  German investors enjoyed a second day of gains to begin the new month of trading, much needed after a rough January in which the DAX fell nearly 6 percent.  Industrials were led by a 2.6 percent gain for Deutsche Post, its biggest gain since January 4, and ThyssenKrupp, which added 1.8 percent after being raised to a “buy” at Bankhaus Metzler.  The German index has looked strong in recent trading, but ECB member Axel Weber said today that the country’s economic recovery will likely not accelerate until next year.

IBEX 35                       10995.20                   +47.50                 +0.43%
For a second consecutive day, trading in Spain led to the smallest gain of the major European indices as the IBEX attempts to regain some of its 3 percent loss from last week.  The leading sectors today were Energy, Basic Materials, and Financials.  Oil prices surged through $77 a barrel today on the NYMEX and helped boost Spanish oil & gas producers as well as alternative energy firms.  Energy leader Gamesa rallied 3 percent after Wind Energy America completed the commissioning of two Gamesa wind turbines in Iowa.  Financial shares rallied over 1.8 percent today led by a 2 percent gain in the country’s largest financial institutions- Banco Santander and BBVA.

FTSE MIB                     22012.00                  +115.71                 +0.53%
The Italian benchmark index gained 0.5 percent in the second day of February trading.  The most active stocks traded in Milan today included financial firms Mediobanca, which gained nearly 6 percent on a potential merger with Assicurazioni Generali, and Banco Popolare, which gained 5 percent.  Telecom Italia added approximately 6 percent on a report that Italy’s government would support a merger between the company and Telefonica.

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com