Fundamentals

European Equities Climb For Sixth Day on Greece Speculation, U.S. Payrolls

Europe Session Key Developments

•   European Union Working to Develop Rescue Plan For Greece
•   German Factory Orders Increase, U.S. Nonfarm Payrolls Better Than Expected
•   Commodities Trade Higher On Dollar Weakness and Better Economic Outlook

European stocks rallied for a sixth consecutive day on speculation for an EU rescue of Greece and better-than-expected jobs data from the U.S.  The Dow Jones Stoxx 600, a broad collection of European equities, closed the trading week at its highest level since January.  Investors continued to applaud actions taken by Greece to reign in the euro-area’s largest budget deficit.  Prime Minister George Papandreou has taken the task of slashing government spending and raising taxes, amid public outcry and protests from his home citizens.  Today, speculation abound that EU nations are working on a rescue plan to aid the Prime Minister in his efforts.  Luxembourg’s Jean-Claude Juncker, who heads the euro-area finance ministers, said that “we’re not abandoning Greece” and praised the country’s efforts thus far.  EU lawmakers plan to hold hearings on the Greece situation in the coming weeks, and investors seem confident that the necessary steps will be taken to maintain stability in the euro zone.  Furthering bullish sentiment was the nonfarm payrolls report out of the U.S., which showed that payrolls fell by 36,000 in February, less than the 68,000 anticipated.  The news helped to rally both equities and commodities, which were led by a near 2 percent gain in the price of crude oil to nearly $82 a barrel.  Precious metals also traded higher, as gold futures rose to $1139 per troy ounce on the COMEX and silver futures rallied above the $17.40 level.  Despite the better-than-expected payrolls data, investors sold off the U.S. dollar due to its “safe-haven” status.  The euro rallied against the greenback to $1.36 at the time of this writing, and cable rose above $1.51.

FTSE 100                    5599.70                      +72.54                       +1.31%
British shares rebounded from yesterday’s losses as basic materials and financials posted strong gains on the day.  Basic materials shares were led by a 5 percent gain for Xstrata and a 4 percent gain for Fresnillo as commodity prices rallied across the board.  Xstrata, a mining firm, agreed to sell the Prodeco coal operations in Colombia to Swiss commodities firm Glencore.  Financial shares rallied over 2 percent today led by fund manager Schroders.  The firm followed up its strong gains from yesterday’s sessions after reporting that assets under management increased 35 percent last year.

CAC 40                            3908.12                     +79.71                      +2.08%
French stocks rallied over 2 percent today as all ten of the CAC components closed higher on the session.  Nearly every stock in the index closed higher as Societe Generale gained nearly 5 percent to push financial shares up over 3 percent on the day.  Technology shares also performed well as Alcatel-Lucent rose 3.5 percent as it expands its relationship with Kenya Data Networks.  Water company Veolia Environnement was the lone laggard on the index, falling 4 percent after reporting full-year net income that missed analysts’ estimates.

DAX                                 5878.57                       +83.25                    +1.44%
German stocks posted gains today as factory orders increased for the month of January.  Consumer goods and basic materials added at least 1.8 percent each to push the overall index to its highest close since January.  Automobiles were the best performing sub-sector of consumer goods, as Daimler gained over 3 percent after announcing its February global sales were 8.9 percent higher than a year earlier.  The report showed that global demand is improving and helped push shares of competitors BMW and Volkswagen up 2.5 percent and 3.2 percent, respectively.

IBEX 35                          11010.20                     +264.90                   +2.47%
Trading in Spain led to the biggest gain among major European indices, as stocks on the IBEX had their best day since July.  ArcelorMittal and Acinerox each gained at least 2.8 percent as commodity prices continued their surge higher.  The financial sector gained over 3 percent on the day, as Banco Santander and BBVA rallied over 3.4 percent each.  Banco Santander raised $2.2 billion today from a sale of bonds backed by U.K. residential mortgages.  The banks were also pushed higher by speculation that they may be in the bidding for Turkish lender Garanti Bank.

FTSE MIB                      22278.12                     +433.56                    +1.98%
Italy’s FTSE MIB advanced for a sixth consecutive session, closing the trading day up over 4 percent on the week.  Among the most actively traded stocks in Milan were Italcementi, Italy’s largest cement maker which gained nearly 2 percent, as well as Banca Italease, whose shares rose 4 percent.  It was the largest increase since 2009 for Banca Italease, after a price was set for an offer by Banco Popolare.  Shares of UniCredit and Intesa Sanpaolo advanced over 1.5 percent each, after analysts at BofA Merrill Lynch initiated a “buy” recommendation to both firms.

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