Fundamentals

European Equities Generally Higher On Greece Speculation, Portugal Cuts

Europe Session Key Developments

•   Speculation of Greece Bailout Continues Following Sarkozy Comments
•   Crude Oil Trades Higher For Second Day, Precious Metals Fall
•   Euro Gains Against Greenback, Cable Lower

European stocks traded around last week’s close most of the session before closing the day slightly lower.  The Stoxx Europe 600 Index was down 0.1 percent to break a streak of six straight higher closes that included the biggest weekly jump since July.  Last week’s rally was due in part to increased speculation of an end to the Greek fiscal crisis and the possibility of a European Union bailout.  This weekend, French President Nicolas Sarkozy offered the strongest comments to date regarding the possibility of a bailout; “I want to be very clear: if it were necessary, the states of the euro zone would fulfill their commitments,” he said.  Meanwhile, in Washington today Greek Prime Minister George Papandreou called for trans-Atlantic cooperation against “unprincipled speculators” whom he blames for much of the surge in Greek financing costs.  Portugal, which faces its own budget problems, announced plans to sell 6 billion euros of assets to cut debt.  Those assets may include stakes in utility EDP-Energias de Portugal SA and oil company Galp Energia SGPS SA.  The government also said it would limit civil servants’ wage increases to below the inflation rate through 2013 as well as delaying part of a high-speed rail project and increasing taxes on those who earn more than 150,000 euros a year.  Portugal hopes that those measures will help it avoid Greece’s financial woes, particularly ahead of a planned sale of 750 million euros of 11-year bonds later this week.

FTSE 100        5,606.72        +6.96        +0.12%
Just under half of the components of the British benchmark index were up today, extending last week’s 4.6 percent gain.  Declines among health care stocks were overcome by healthy gains from the utility and energy sectors.  All four health care components were down as the group declined 0.6 percent.  AstraZeneca led the sector lower after its experimental Recentin drug failed to match Roche Holding AG’s Avastin in tests for use as a first-line treatment against colon cancer.  AstraZeneca’s stock fell 1.42 percent to 2,953 pence and erased 2.42 index points.

CAC 40          3,903.54        -6.88            -0.18%
Trading on the CAC led to the worst performance among benchmark indices for the top five European economies.  The French Business Confidence took a hit, unexpectedly dropping from 104 to 102 in February as the government phases out economic stimulus measures.  Among French equities, industrial stocks were the worst performers, dropping 0.5 percent as a group.  EAD, the maker of Airbus jets, was right in line with the group’s decline, slipping 0.5 percent after six straight days of gains.  The company said it would report a loss for 2009.

DAX            5,875.91        -1.45            -0.02%
German stocks, weighed by the basic materials sector, were marginally lower as a group.  German industrial production rose in January by 0.6 percent after falling 1 percent in December.  Economists had forecast a 1 percent gain in January.  On the equities front, basic materials shares were down 0.4 percent as the CRB Commodity Index was slightly lower.  German steelmaker Salzgitter dropped 1.4 percent after the company was cut to “neutral” from “overweight” at JPMorgan Cazenove.

IBEX 35            11,078.30        +58.50            +0.53%
Stocks on Spain’s benchmark index gained for a seventh consecutive day, pushing the IBEX to its highest close since February 2.  Basic materials and energy stocks were the strongest performers today on generally higher commodity prices.  Acerinox was the strongest among basic materials shares, gaining 2.3 percent after Kepler Capital Markets raised its recommendation on the shares on Friday.  Spanish-Argentine oil group Repsol led energy shares, gaining 1.2 percent.

FTSE MIB            22,398.21        +120.09            +0.54%
Trading on Italy’s FTSE MIB  led to the largest gain among major European indices.  Banca Generali rose for a sixth consecutive session, gaining over 4 percent after announcing that net income was significantly better than last year.  Saipem, Europe’s largest oilfield-services provider, gained nearly 2 percent on rising crude prices.

Written by Gary Chalik, CFDTrading Research
Please send any comments about this report to GChalik@fxcm.com