Fundamentals, Uncategorized

European Equities Halt Five-Day Rally, Euro Continues Slide Against Dollar

Europe Session Key Developments

•    European Leaders Discuss Bailout for Greece
•    Swiss Money Supply Increases 5 Percent in January
•    Euro Continues Slide Against U.S. Dollar

Following their strongest week since July, European stocks consolidated today as all five major indices closed lower.  The DJ Stoxx 600 Index, a broad measure of European equities, slipped 0.3 percent after gaining nearly 4 percent last week.  Problems in Greece returned to the minds of investors after the country’s prime minister, George Papandreou, insisted yesterday that his administration was not seeking a bailout.  Greek central bank Governor George Provopoulos stated today he is confident that the Greek government will reign in the euro region’s largest deficit and will meet its “very ambitious” reduction goals.  Market participants took little solace from the announcement, however, as concerns linger regarding the sustainability of the euro currency.  In addition to Greece, the European nations of Spain, Portugal, Ireland, and Italy are seen as threats to the stability of the euro area.  The region’s currency fell against the U.S. Dollar for a third time in the last four days and has now dropped over 5 percent against the greenback for the year.  As for the economic docket, the only data today was a 5.6 percent increase in the Swiss money supply in January, an event that had little to no impact on price action.  Looking towards trading tomorrow, the only significant economic releases that could impact the market are consumer prices from Italy and France, IFO data from Germany, and housing loans data from the U.K.

FTSE 100                         5352.07                     -6.10                     -0.11%
British stocks fell for only the second time in the last eleven trading sessions due to weakness in health care as well as consumer goods and services.  Drug makers GlaxoSmithKline and AstraZeneca were large contributors to the decline in health stocks after U.S. President Barack Obama announced that he may increase fees on drug companies to raise revenues to extend health care benefits to the uninsured.  In addition, Glaxo shares were hit by concerns that the compay may face lawsuits over its Avandia diabetes treatment.  As for consumer goods, tobacco companies British American and Imperial fell 1.1 percent each, just one day after leading the sector.  Luxury apparel maker Burberry was the worst performer of the consumer products sector, falling 1.7 percent.  On the positive side, shares of Royal Bank of Scotland rallied 3.6 percent to lead financials, as investors await the bank’s fourth-quarter earnings announcement on Thursday.

CAC 40                             3756.70                     -12.84                     -0.34%
Despite strength in technology shares, French equities closed lower today as consumer services fell over 1.5 percent.  Losses in Carrefour and Accor pushed consumer shares lower and offset a strong 2.2 percent gain in CAC technology stocks.  Carrefour fell 2.4 percent after BNP Paribas cut the largest retailer in Europe from “outperform” to “neutral.”  Other shares hurt by downgrades or target price revisions were insurance firm Axa and liquor maker Pernod Ricard.  Axa was downgraded from “buy” to “hold” from analysts at Citigroup, while Pernod received a target price reduction from analysts at Goldman Sachs.

DAX                                   5688.44                        -33.61                     -0.59%
The German index snapped its longest winning streak this year as 21 of the 30 DAX stocks closed lower on the day.  Daimler was the worst performer on the index, dropping 2.7 percent after deciding to extend the contract of Chairman Dr. Dieter Zetsche despite the company posting a $3.4 billion loss for 2009.  Furthering declines in consumer goods and services was Hochtief, the largest construction company in Germany, which dropped 2.1 percent.  Deutsche Lufthansa fell over 1 percent as pilots began a strike today over job security.

IBEX 35                          10570.50                     -106.20                 -0.99%
Shares in Spain fell nearly a full percent today, as every IBEX sector closed lower on the day with the exception of basic materials.  Leading the decline for the index was consumer services, as Inditex and Telecinco dropped at least 1.8 percent each.  Furthering declines for the IBEX was weakness in technology and health care shares, which fell at least 1.6 percent each.  As for basic materials, Acerinox posted a 1.5 percent gain, while Arcelormittal gained just under 0.1 percent.

FTSE MIB                     21704.78                     -67.55                   -0.31%
Italy’s FTSE MIB posted a slight decline today for the first time in six sessions.  Trading in Milan led to the largest decline in two weeks for Italian publisher Gruppo Editoriale L’Espresso, which dropped nearly 3 percent.  Telecom Italia also posted a near-three percent decline, ending a four-day rally.  Unicredit, the largest bank in Italy, fell 1 percent after Intermonte Sim reduced its price target on the firm.

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