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European Stocks Slump as Dovish Commentary by Federal Reserve, Downward Revision of UK GDP by Bank of England Erode Recovery Sentiment

Europe Session Key Developments

• The Bank of England Revised Downwards its Growth Forecasts
• Chinese Inflation Outpaces Expectations; Growth to Cool
• Fed Reserve’s Dovish Commentary Spooks Investors

European Stocks Slump as Dovish Commentary by Federal Reserve, Downward Revision of UK GDP by Bank of England Erode Recovery Sentiment

European equity markets slumped on Wednesday as a string of weak economic data from Asia and Europe eroded investor sentiment. Early in the session, Chinese policy makers announced that the Consumer Price Index for July rose by 3.3 percent, despite falling retail sales and industrial production. Furthermore, slowing exports reveal the risk that softened overseas demand for Chinese goods will drive a further slowdown in the world’s third-largest economy. Meanwhile, while Britain’s ILO Unemployment Rate held steady at 7.8 percent in June, the Bank of England today downgraded its forecast for U.K. growth and now expects inflation to be above the central bank’s target until at least 2012. In part, the higher inflation forecasts are due to the valued-added tax expected to be imposed starting in January. The Bank of England’s quarterly inflation report notes that “risks to growth remain weighted to the downside,” and as such, the Bank’s austerity plan as well as quantitative easing plan are likely to continue for some time. Much of the fall, though, was fueled by dovish commentary by the Federal Reserve yesterday, as the U.S. Federal Open Market Committee said that the recovery is going to be “more modest” than previously forecasted. Accordingly, all major European equity markets fell more than 2 percent, with the IBEX and S&P/MIB falling more than 3.20 percent each.

Looking forward to Thursday, there are several events on the docket that could prove to be market moving. The European Central Bank publishes his August Monthly Report, while later on Euro-zone Industrial Production for June is expected to show an increase by 0.6 percent. Overall, Industrial Production is forecasted to rise by 9.3 percent from the same period in the previous year. In the U.S., jobs data is due in the middle of the European session. Initial Jobless Claims are anticipated to rise by 465 thousand, for the period of August 7, while Continuing Claims for the period of July 31 are expected to weigh in at 4535 thousand.

FTSE 100                      5245.21                   -131.20               -2.44%

The FTSE 100 fell another 131.20 points, or 2.44 percent, to finish the day at 5245.21. The index has been unable to hold on to any gains above 5400 in recent weeks. As discussed above, dovish comments from the Bank of England shook investor sentiment regarding the health of the domestic recovery, which translated into today’s poor performance. The basic materials sector was the worst performing of all ten sectors; it lost 3.84 percent Wednesday after shedding 2.22 percent yesterday. Shares of Rio Tinto, the world’s third largest mining company, fell 3.88 percent, while BHP Billiton PLC, the world’s largest mining company, watched its share price fall another 3.34 percent. Shares of embattled oil producer BP lost almost 2 percent before closing at 411.00 in London.

CAC 40                        3,628.29                  -102.29                 -2.74%

The CAC 40 continued yesterday’s rapid sell-off, losing another 102.29 points, or 2.74 percent, before closing at 3628.29. The French index has now fallen nearly 4 percent in two days. All of the CAC’s ten sectors finished lower as not a single company managed to post an intraday gain. As was the case on Tuesday, the financial companies were again the French index’s worst performers. The financial sector gave back 4.01 percent on Wednesday, led by the nation’s largest bank, BNP Paribas, whose share price fell 3.93 percent. Shares of Societe Generale lost another 4.19 percent after falling almost 3 percent yesterday.

DAX 30                        6154.07                     -132.18                 -2.10%

As has been the case throughout 2010, the DAX 30 managed to outperform its European counterparts, limiting its losses to 132.18 points, or 2.10 percent. The German index now sits at 6154.07 as it tests trendline support originating in mid-June. The industrial sector was the worst performing of the index’s nine sectors; it lost 2.92 percent during Wednesday’s trading session. The sector’s decline was led by its largest component, Siemens AG. The nation’s largest manufacturer watched its share price fall 2.60 percent intraday; it has now given back nearly all of its gains from earlier in the week after a better-than-expected German Exports figure.

IBEX 35                     10374.80                   -343.70              -3.21%

The IBEX 35 was the worst performing major European equity index on Wednesday; the Spanish index lost 343.70 points, or 3.21 percent, to close at 10374.80. Today’s decline marked the biggest sell-off since June 24th, when the index dropped nearly 367 points. Though all 10 of the index’s sectors finished lower, the IBEX was weighed by its financials sector, which lost 4.33 percent during intraday trading. The performance of the broader IBEX 35 is particularly vulnerable to its financial companies, as they comprise over 40 percent of the entire index’s weight. Banco Santander, the nation’s largest bank, saw its share price decline 4.39 percent to close at 9.72, the midpoint of its 52-week range.

FTSE/MIB                20579.24                -680.65               -3.20%

The FTSE/MIB plummeted an incredible 680.65 points, or 3.20 percent, before closing at 20579.24. Today’s move was the largest intraday decline since June 4th, when the Italian index lost nearly 800 points. The MIB is now down 11.48 percent in 2010, only outdone by the Spanish IBEX 35, which has lost 13.11 percent year-to-date.

Written by Jay B. Steinberg and Christopher Vecchio, CFD Trading Analysts
For Questions/Comments, please contact him at JSteinberg@fxcm.com

Major European Indices Finished Mixed Despite Thursday’s Notable Event Risk

Europe Session Key Developments

• Encouraging German Factory Orders Fail to Move Markets
• ECB, BoE Keep Overnight Lending Rates Steady

Major European Indices Finished Mixed Despite Thursday’s Notable Event Risk

European equity markets finished Thursday relatively unchanged despite major event risk throughout the session. Early in the session, German Factory Orders for June outpaced analysts’ forecasts, expanding by 3.2 percent against a predicted 1.4 percent gain. Following the surprising data, German Bund yields dropped across the board. Unsurprisingly, both the Bank of England and European Central Bank held their interest rates at 0.50 percent and 1.00 percent, respectively. The Bank of England also announced that it would retain its Asset Purchase Target at £200 billion. While ECB President Trichet declared that there would be “no chance” of a “double-dip” recession thus rendering the current rate appropriate, he did note that the ECB will do whatever is necessary to halt any further backlash from the sovereign debt crisis. Despite this positive sentiment, investors were unimpressed with the news and equity markets barely moved. The FTSE, IBEX, and S&P/MIB all fell less than 0.8 percent, while both the CAC and DAX crept up by less than 0.1 percent each.

Looking ahead to tomorrow, significant data coming from across Europe and the United States could prove to be market moving. British Industrial Production data for June is expected to show 0.1 percent expansion while the Producer Price Index for July is forecasted to drop by 0.5 percent. Additionally in Europe, German Industrial Production data for June and Italian Gross Domestic Product for the second quarter will be released as well. However, in what will likely be the most important data released on Friday, U.S. Non-farm Payroll data, as well as the Unemployment Rate, for July will be released in the second half of the European trading session. With Payrolls expected to drop, and the Unemployment Rate forecasted to increase to 9.6 percent in the United States, Friday could prove to be a volatile trading day across equity markets and currencies.

FTSE 100                      5365.78                   -20.38               -0.38%

Continuing yesterday’s decline, the FTSE 100 gave back another 20.38 points, or 0.38 percent, to finish at 5365.78 after Thursday’s trading session. The British index now sits down 0.87 percent year-to-date after managing to turn positive last week.  Today’s price action was guided by a disappointing performance by the FTSE’s consumer goods sector, which dropped 2.10 percent. Unilever PLC (ULVR LN), one of the U.K.’s largest manufacturers of branded and packaged consumer goods,  lost 5.19 percent. Also noteworthy was Barclays PLC, which dropped 4.66 percent to finish at 324.00 in London.

CAC 40                     3,764.19                  +3.47                 +0.09%

The CAC 40 managed to finish up 3.47 points, or 0.09 percent, to close at 3764.19. Despite testing the psychologically significant 3800 level during intraday trading, the French index retraced following the central bank announcements discussed above. Out of the index’s ten sectors, five finished higher.  The industrial sector benefitted from the encouraging German Factory Orders figure, adding 0.96 percent. The sector’s top performer was EAAD FP, an airplane and military equipment manufacturer; the company’s share price gained 2.95 percent to close at 18.68. Following up from yesterday, Electricite de France (EDF) retraced part of Wednesday’s gains, giving back 1.02 percent. Recall that French Finance Minister Christine Lagarde announced that power rates in the country will rise by 3 percent for households and 4-5.5 percent for companies on August 15th

DAX 30                        6333.58                    +2.25           +0.04%

On Thursday, the DAX 30 again tested the 6380 level, which has served as significant resistance since this April. After reaching an intraday high of 6382.56, the DAX retreated late in the session and closed at 6333.58, just 2.25 points, or 0.04 percent, higher. The DAX 30 as a whole was unable to hold onto its early gains following the encouraging domestic Factory Orders report, but the industrials and basic materials managed to lock in substantial gains (1.05 percent and 1.00 percent, respectively). Siemens AG led the industrial sector, finishing up 1.46 percent to close just below its 52-week high at 78.00. Deutsche Telekom dragged the broader index lower, losing 2.76 percent to end the trading session at 10.21.

IBEX 35                     10840.30                   -3.30                -0.03%

Like its European counterparts, the IBEX 35 finished nearly even after Thursday’s trading session. Despite trading 100 points higher at 11:00 GMT, the Spanish index gave back a modest 3.30 points, or 0.03 percent, to close at 10840.30. The index’s financial sector, which accounts for over 40 percent of the broader IBEX’s weight, finished up 0.09 percent. Banco Santander, the nation’s largest bank and the index’s largest holding, gained 0.29 percent to close at 10.38. Both the utilities sector and the consumer services sector weighed on the index, losing over 0.30 percent each.

S&P/MIB                        21302.97                    -163.47                  -0.76%

After trading above the 21550 mark intraday, the Italian index lost over 163 points, or 0.76 percent, to close at 21302.97. The MIB may soon surpass the IBEX 35 as the worst performing major European index year-to-date; it is currently down 8.37 percent in 2010.

Written by Jay B. Steinberg and Christopher Vecchio, CFD Trading Analysts
For Questions/Comments, please contact him at JSteinberg@fxcm.com

U.S. Equities Sink Lower, S&P Hits Seven-Month Low

U.S. Session Key Developments

•    Goldman Sachs, Moody’s, and Warren Buffet Receive Subpoenas From Commission
•    Consumer Credit Unexpectedly Increases $1.0 Billion in April
•    Euro Drops Below $1.19 Intraday

U.S. stocks followed their Asian and European counterparts into the red, as investors remained bearish amid threatening fiscal deficits and high unemployment.  The S&P 500 fell to the 1050 level, the lowest close for the index in seven months.  Although there was some positive news out of Europe, including a better-than-expected German factory orders release, overall sentiment remained negative as macro trends out of the euro zone pointed to more downside risk.  Furthering weakness in equities was news of a subpoena issued to Goldman Sachs by the U.S. panel investigating the financial crisis.  According to reports, the investment bank failed to hand over documents in a “timely manner.”  Also receiving subpoenas from the commission were ratings agency Moody’s Corp. and legendary investor Warren Buffet.

DJIA 30                        9,816.49                          -115.48                       -1.16%
The bearish sentiment following Friday’s NFP report continued into today, pushing the broad-based Dow Jones Industrial Average down by over 100 points.  Caterpillar and Alcoa dropped over 3 pecent each, while Disney and Microsoft fell nearly 2 percent on the session.  Only five of the Dow’s 30 stocks closed higher on the day, led by a 0.6 percent gain in Walmart shares.

S&P 500                       1,050.47                            -14.41                        -1.35%
The broad-based S&P 500 slumped to a seven-month low, led by large declines in financial shares and industrials.  Among bank stocks, Citigroup and Bank of America fell over 3 percent each, while Goldman Sachs, JPMorgan Chase, and Morgan Stanley shed over 2 percent on the day.  The decline in industrial shares was precipitated by a near 5 percent decline for General Dynamics.

NASDAQ                      2,173.90                           -45.27                       -2.04%
Shares on the tech-heavy Nasdaq posted the largest decline among major U.S. indices as technology shares plunged over 2.3 percent.  BlackBerry maker Research in Motion dropped over 5 percent, followed closely by Chinese search engine Baidu and Seagate Technologies, which fell over 4 percent each.  The most heavily weighted tech companies on the index, Apple and Microsoft, each declined approximately 2 percent on the day.

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

U.S. Equities Rally on Strong Earnings Reports

U.S. Session Key Developments

•    Strong Earnings Reported from Starwood Hotels, Motorola, and Akamai Technolgies
•    Chicago Fed Activity Index Higher Than Expected For March
•    Crude Oil Rallies to Two-Week High on Economic Outlook, Dollar Weakness

U.S. stocks rallied for a second straight day on strong earnings reports from numerous companies including Starwood Hotels, Motorola, and Akamai Technologies.  The news was further evidence of a strengthening economic recovery and continued the strong earnings trends of the first quarter.  Motorola, the largest U.S. mobile-phone maker, rallied over 3 percent following the company’s release, while Starwood Hotels gained 5.6 percent.  Shares of Akamai Technologies, an online content delivery company, rose over 19 percent after the company announced that its first-quarter profit climbed 10 percent.  Furthering bullish sentiment was the Chicago Fed Activity Index, that beat expectations and rose to -0.07 in March, on improvements in production- and employment-related indicators.  The index once again approached positive territory, a feat the index has only achieved once since mid-2007.  Overall, the S&P 500 Index posted its strongest one day gain since early March, closing above 1200 for the day.

On the commodities front, crude oil rallied to its highest level in two-weeks, closing above $85 a barrel on strong economic sentiment and weakness in the U.S. dollar.  Investors felt less inclined to hold the greenback for its “safe” qualities, causing the U.S. Dollar Index the fall below the 82 level.  Despite the currency’s weakness,  COMEX gold futures ticked slightly lower to $1168, but COMEX silver futures rallied over 2.4 percent to $18.57.

DJIA 30                     11,167.32                      +122.05                       +1.11%
The Dow Jones Industrial Average posted its largest one-day gain since early March as 27 of the 30 Dow stocks closed in the black.  American Express posted the largest gain on the index, adding 3.3 percent just one day after launching an express mobile application for the Apple iPhone.  Other strong shares on the index were DuPont, Caterpillar, and Disney which each added over 2.5 percent.  On the downside, Procter & Gamble fell 1.5 percent, while Exxon Mobil and Hewlett Packard dropped 0.7 percent each.

S&P 500                       1,206.78                           +15.42                       +1.29%
The broad-based S&P 500 rallied for a second day as financials gained 2.3 percent and industrials added 1.9 percent.  Financial shares were generally higher after yesterday’s FOMC announcement that policy makers would maintain a near-zero percent Fed Funds rate for the foreseeable future.  Banking giants Wells Fargo, Citigroup, Goldman Sachs, and Bank of America each rose over 2 percent on the news.  As for industrials, Honeywell added 3.1 percent on the session, while General Electric gained 2.8 percent on the day.

NASDAQ                     2,511.92                         +40.19                       +1.63%
Shares on the tech-heavy Nasdaq posted the biggest gain among major U.S. indices as technology shares rallied over 1 percent.  Shares of Chinese search engine Baidu rallied over 14 percent on strong first quarter earnings, while Apple and Cognizant gained at least 2 percent each.  Yahoo!, Cisco, and Applied Material gained 1 percent on the day.

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

Asian Stock Markets Advance on Enhanced Earnings, Rising Commodity Prices

Asia Session Key Developments

• Hong Kong Stocks Post Biggest Monthly Gain Since October
• Japan’s National CPI Extends 11-Month Decline
• Australia’s Private Sector Credit Rises for the Third Straight Month

Stocks in Asia/Pacific advanced on Friday amid higher commodity prices, with the Australian market benefitting from better-than-expected earnings results. Meanwhile, the economic docket in Japan showed national consumer prices extended its 11-month decline, with the annualize rate slipping 1.3% from the previous year, while manufactures increase production at the fastest pace since May as outputs jumped 2.5% in January to top forecasts for a 1.0% rise. However, sales by large retailers in the region tumbled 5.6% during the same period amid expectations for a 4.6% decline, while motor vehicle production surged at an annual pace of 30.7% after advancing 8.6% in December. At the same time, Australia private sector credit rose for the third straight month in January, with the index increasing 0.4% after rising 0.3% in the previous month.

Nikkei 225                          10,126.03

Stocks in Japan strengthened on Friday, paring yesterday’s decline, leading the Nikkei 225 to advance 24.07 points (0.24%) and close at 10,126.03. Seven out of the ten components traded higher on the day, with oil & gas adding 1.52%, while utilities tumbled 0.65%. Shares of Mazda Motor rallied 4.00% after the Japan Automobile Manufacturers Association said output for the country’s 12 vehicle makers rose 31% from a year earlier, while Aeon rose 2.93% amid Goldman Sachs Group upgrading the company’s stock rating from “neutral” to “buy.” At the same time, NEC, Japan’s largest maker of personal computers pushed 2.49% higher as the company announced a 3-year plan to raise its net income to 100 billion yen, while Nippon Light Metal increased 4.08% on the back of higher metal prices.

Hang Seng                        20,608.70

The Hong Kong equity market pushed higher on Friday, with stocks posting its biggest monthly gain since October, leading the benchmark equity market index to gain 209.13 points (1.03%) and close at 20,608.70 as all nine components rallied on the day. Shares of China Petroleum & Chemical advanced 4.10% on the back of higher energy prices, while Cathay Pacific Airways gained 2.12% as the company, along with Air China signed a an agreement in Beijing establishing a jointly owned, Shanghai-based cargo airline. In addition, China Unicom jumped 7.63% after Deutsche Bank raised its share price forecast for the firm and raised the rating to “buy” from “hold,” while China Mobile added 0.20% as Guotai Junan Securities reported that the company or its state-owned parent may buy 20% of Shanghai Pudong Development Bank for about 40 billion yuan.

S&P/ASX 200 Index           4,637.70

Shares in Australia halted yesterday’s decline, leading the S&P/ASX 200 to rally 43.60 points (0.95%) and close at 4,637.70. Six out of the ten components pushed higher on the day, with utilities leading the way, adding 2.46%, while telecommunications shed 0.99% to taper the advance. Shares of Newcrest Mining, Australia’s largest gold producer tipped 1.92% higher as gold futures in New York gained for the first time this week, while Crown, Australia’s largest casino owner climbed 2.17% as the company posted first-half profit . Moreover, Perpetual gained 2.77% after Credit Suisse raised the company’s stock rating from “underperform” to “neutral,” while Woolworths, Australia’s largest retailer soared 5.46% as the firm plans to buy back A$400M of stock outstanding.

Notable Asian Session Event Risk / Economic Releases

U.S. Equities Retreat For Second Day on Weak Confidence Data

U.S. Session Key Developments

•    Consumer Confidence Falls to 10-Month Low
•    Commodities Sell-Off, Dollar Gains
•    Fed Chairman Bernanke to Deliver Report on Economy Tomorrow and Thursday

U.S. stocks retreated today on weak consumer confidence data and falling commodity prices.  The S&P fell for a second consecutive day to its lowest closing level since February 12.  Investors turned bearish after the Conference Board announced its confidence index fell in February from 55.0 to 46.0, its lowest reading in ten months.  The weak confidence data shows that economists do not believe the U.S. economy is out of the woods yet and the recovery will struggle to overcome major hurdles that still remain.  Weak consumer spending and high unemployment are the most obvious concerns going forward, and San Francisco Federal Reserve President Janet Yellen said yesterday that she does not see the employment situation improving much this year.  Further weakening sentiment today was the S&P/Case-Shiller housing index that showed home prices fell annually for a third consecutive month in December to their lowest levels since July.  The data led to widespread risk aversion that filtered through commodities as well as stocks.  Crude oil fell 1.8 percent to $78.86, while gold and silver prices fell 0.8 percent and 2 percent, respectively.  Looking ahead, all eyes will be on Fed Chairman Ben Bernanke’s testimony before House and Senate panels both tomorrow and Thursday.  This is his semi-annual report to Congress regarding the state of the economy as well as monetary policy.

DJIA 30                     10,282.41                      -100.97                       -0.97%
The Dow Jones Industrial Average posted a near 1 percent decline as twenty-seven of the thirty index stocks closed lower on the day.  General weakness in commodity prices hurt the basic materials and industrial sectors, as aluminum giant Alcoa dropped 2.5 percent and equipment maker Caterpillar fell 2.3 percent.  A drop in crude oil futures below $79 pushed shares of energy giants Chevron and Exxon Mobil down 1.2 percent and 0.7 percent, respectively.  One of the few bright spots on the Dow was Home Depot, which posted a 1.4 percent gain to lead the index after announcing better-than-expected earnings and its first dividend increase since 2006.  Kraft Foods also posted a modest gain today of 0.6 percent after analysts at Credit Suisse gave the stock an ‘overweight’ rating.

S&P 500                     1,094.60                         -13.41                         -1.21%
The broad-based S&P declined over 1 percent on weakness in commodities and the financial sector.  Shares in financial firms traded lower after the FDIC announced that bank failures are continuing their torrid pace, with one of every 11 banks at risk of failure as of the fourth quarter.  The sector fell nearly 2 percent on the FDIC announcement, as well as a news briefing from White House spokesman Robert Gibbs where he said that the Obama administration continued to back the Volcker banking plan in its current form.  According to the proposed regulation, banks would no longer be allowed to use proprietary trading operations, hedge funds, or private equity funds in ways that are unrelated to directly serving their customers.  Citigroup fell 3 percent on the news, while JPMorgan Chase, Wells Fargo, and Morgan Stanley dropped at least 2 percent each.

NASDAQ                     2,213.44                         -28.59                         -1.28%
The tech-heavy Nasdaq was the worst performer of the major U.S. stock indices as technology shares fell over 1.5 percent.  The twenty largest tech companies on the index all posted losses today, led by declines in Applied Materials and Marvell.  The semiconductor firms fell 3.5 percent and 2.5 percent, respectively, despite a generally favorable report on the sector released yesterday by analysts at UBS.  The world’s largest chipmaker, Intel Corp., faltered over 2 percent after announcing that the company, alongside venture-capital companies, will invest $3.5 billion in the U.S. technology sector over the next two years to facilitate domestic job growth.

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

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

European Equities Cap Biggest Weekly Gain Since July

Europe Session Key Developments

•    French Data Generally Disappoints, Euro-Zone and German Data Show Improvement in Manufacturing
•    Commodities Trade Sideways After Fed Raises Discount Rate
•    Euro Gains Versus Greenback For Second Time This Week, Pound Falls To Nine-Month Low

Stocks in Europe extended their largest weekly gain since July as manufacturing data for Germany and the general euro zone beat expectations.  The Dow Jones Stoxx 600 Index, a broad measure of European equities, rose 0.5 percent to increase its weekly gain to 3.9 percent.  After initially trading lower on yesterday’s unexpected news of Fed tightening, European shares rallied collectively on strong economic data from Germany, Italy, and the general euro zone.  Germany announced that the country’s PMI manufacturing index unexpectedly rose from 53.7 to 57.1 in February, while industrial orders in Italy trumped expectations by rising 10.1 percent in 2009.  Furthering bullish sentiment was a report that the euro area’s PMI manufacturing index and PMI composite index beat expectations for December.  As for commodities, crude oil ticked slightly higher as it approached $80 a barrel, while metals surprisingly held at yesterday’s closing levels despite the unexpected hawkish maneuver of the Federal Reserve.  During after-hours yesterday, the Fed increased the discount rate for the first time in three years, but markets managed to shake off the tightening as Chairman Bernanke’s commentary maintained that the Federal Funds Rate would remain at historic lows for the time-being.  Yesterday, the greenback immediately spiked higher against its European counterparts after the Fed decision, but during today’s session the Euro managed to rally against the Dollar for only the second time this week, rising to $1.3613 at the time of this writing.  The sterling, however, continued its slide against the American currency, falling to a nine-month low on the session.  Overall, the U.S. Dollar Index rallied intraday above 81.30, and closed near a seven-month high.

FTSE 100                         5358.17                     +33.08                     +0.62%
British stocks posted their ninth gain in the last ten days, led by consumer goods which gained 1.7 percent.  At least two stocks gained for each that fell on the FTSE today, as better-than-expected retail sales over the twelve months ended in January boosted investor sentiment.  Unilever was the biggest gainer among consumer goods companies, adding 2.6 percent on the session, while tobacco firms British American and Imperial added over 2 percent each.  British American received a boost from analysts at Nomura, yesterday, who raised their price target on the company’s shares.  The only sector to close lower today was basic materials, hurt by a 1.8 percent decline for Anglo American after the mining company posted a 53 percent decline in net annual profit.

CAC 40                             3769.54                     +21.71                     +0.58%
French equities gained over 0.5 percent today, despite weak economic data for the country.  Investors managed to shrug off a drop in business confidence for February as well as worse-than-expected PMI numbers for the month.  The leading sectors today were technology, financials, and utilities, which each added at least 0.8 percent.  Vallourec, a tubular technology firm, posted the biggest gain on the CAC, adding over 2 percent on the day.  Following closely behind were Lagardere, Credit Agricole, and Vivendi, which each gained at least 2 percent on the session.  Overall, twenty-nine of the forty CAC stocks closed higher in the week’s final day of trading.

DAX                                   5722.05                        +41.64                     +0.73%
The German index extended its longest winning streak this year as strong manufacturing data increased risk appetite and lead stocks higher.  Consumer goods led the way with a 2 percent gain, while technology and consumer services shares added at least 1.3 percent each.  Automobile producers were the strongest group among the consumer goods sector as BMW gained 3.4 percent and Daimler added 2.5 percent.  Technology shares were led by a 1 percent gain for Infineon and SAP.

IBEX 35                          10676.70                     +102.50                 +0.97%
Shares in Spain added nearly a full percent today, led by a 3 percent gain in health care shares and a 2.4 percent rise in consumer services.  Bolsas Y Mercado was the strongest performer on the index, adding 3.8 percent, while Grifols closed right behind, up 3 percent.  Thirty-three of the thirty-five index stocks closed higher in the week’s final day of trading, with Gamesa and Acerinox being the only two exceptions.  Gamesa shares fell despite a decision to rehire 79 laid-off employees.

FTSE MIB                     21722.33                     +86.21                   +0.40%
Italy’s FTSE MIB posted the smallest gain among major European indicies, despite a strong industrial orders report.  The report showed that industrial orders unexpectedly rose 4.7 percent in December and 10.1 percent for the year.  Trading in Milan led to a strong showing for EEMS Italia, which gained 6 percent after Intermonte Sim reiterated a “buy” rating on the company.  Italian carmaker Fiat also posted a strong gain of 2.3 percent, after Cheuvreux said that Fiat’s profit targets are not out of reach despite weakness in the automobile sector.

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

European Equities Post Biggest Gain in Six Weeks

Europe Session Key Developments

•    Greek Bond Yields Dip Slightly After Greek Official Says Bailout Unnecessary
•    Crude Oil Posts Sixth Gain in Seven Days, Precious Metals Decline
•    Euro Resumes Bearish Trend Versus Greenback

Stocks in Europe posted their biggest gain in six weeks on renewed optimism over the Greece debt situation and better-than-expected economic data out of the U.S.  The DJ Stoxx 600 Index, a broad measure of European equities, posted its seventh gain in the past eight days.  Investors seemed cautiously optimistic that the debt problems in Greece would not threaten euro area stability after Greek Finance Minister George Papaconstantinou said yesterday that his country had “no actual need for” a bailout and was ahead of its deficit-reduction targets.  The 10-year yield on Greek bonds fell 2 basis points to 6.37 percent, reducing the excess risk premium required over equivalent German bonds by 1 basis point.  Overall, the yield on Greek bonds has increased 184 basis points this year on concern that the country would struggle to reduce the largest fiscal deficit in the euro zone.  As for the economic docket, the only major event out of Europe was U.K. unemployment, which investors managed to shrug off.  Instead, markets keyed on positive economic releases from the U.S. which showed that industrial production rose 09 percent in January and building permits beat expectations during the month.  Overall, European stocks remain 4.8 percent below this year’s high on January 19, but sentiment has clearly improved over the last week.

FTSE 100                         5276.64                     +32.58                     +0.62%
British stocks posted the smallest gain among major European indices after U.K. unemployment claims unexpectedly rose in December to the highest level since 1997.  The ILO unemployment rate for the last three months of 2009 held at 7.8 percent, as expected.  Despite the disappointing news, shares on the FTSE rallied for a third consecutive day and nine stocks gained for each that fell on the index.  Barclays gained 2.9 percent to lead banking shares higher, a day after announcing earnings that soundly beat analyst expectations.  RBS raised its recommendation on the company’s shares from “hold” to “buy” and Bank of America Merrill Lynch raised its price target.  RBS and Lloyds Banking Group gained 3.2 percent and 1.9 percent respectively, on anticipation of their earnings reports due out next week.  Further driving the FTSE today was Man Group, the largest publicly traded hedge fund, which added 5 percent on the day.  Some investors have speculated that the firm may receive a takeover bid from asset manager BlackRock.

CAC 40                             3725.21                     +56.17                     +1.53%
The French index added at least 50 points for a second consecutive session today, led by strength in financials, industrials, and technology shares.  Aerospace and defense leaders EADS was the biggest individual gainer on the index, adding 4.9 percent on news that the company’s seven government clients will pay additional costs for the A400M military plane.  Accor posted the second-largest gain, adding 4.2 percent on news that the hotel operator would increase its operable capacity by over 45 percent.  BNP Paribas, France’s largest bank, led financial shares higher after recording its fourth consecutive quarterly profit.  The bank’s shares rallied 3.9 percent after the company reported 1.37 billion euros of fourth quarter net income, above the 1.06 billion estimate of bank analysts.

DAX                                   5648.34                        +56.22                     +1.01%
The German index rallied for a third consecutive session as financials and industrials gained at least 1.4 percent each.  Deutsche Boerse, Europe’s largest exchange by market value, gained 3.7 percent to lead financials higher after the company announced a significantly smaller fourth quarter loss than analysts expected.  Deutsche Bank followed suit, adding 2.1 percent to its highest close in two weeks, after the German bank announced a sale of wealth manager BHF-Bank.  Industrial shares were led higher by mailing company Deutsche Post, which gained 2.3 percent, and Siemens, which rose 1.6 percent.  Siemens, a leader in electronics and electrical engineering, rallied on speculation that the company may acquire some components suppliers this year.

IBEX 35                          10498.60                     +104.70                 +1.01%
Shares in Spain added a full percent today, led by a 6 percent gain for Obrascon Huarte and a 4 percent increase in Grifols.  Shares of Obrascon Huarte, the Spanish building and infrastructure firm, had dropped in the four prior sesssions on weakness in the construction sector.  Grifols, a plasma firm, gained after its Australian peer CSL confirmed its full-year profit forecast.  Financial shares in Spain followed their global counterparts higher today, led by a 2.8 percent gain in Mapfre, and a 1.4 percent gain for Banco Santander.

FTSE MIB                     21650.81                     +361.61                   +1.70%
Italy’s FTSE MIB posted the biggest gain among major European indicies, rising nearly 2 percent on the day.  Trading in Milan led to a 4.6 percent gain for Fiat, after Italian Industry Minister Caludio Scajola said there are 14 offers for a company plant in Italy.  Intesa Sanpaolo gained over 4 percent on a potential unwinding of an investor agreement between Generali and Credit Agricole.  Fondiaria-Sai fell for a second straight day, dropping nearly 1 percent, after Banca Akros downgraded the insurance firm.

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

European Equities Close Lower on Weak GDP Data, Tightening in China

Europe Session Key Developments

•    China Unexpectedly Increases Bank Reserve Requirements
•    Fourth Quarter Growth Disappoints in Germany, Italy, Euro-Zone
•    Euro Falls Against U.S. Dollar For Third Day, Cable Drops

European stocks closed lower today after China unexpectedly increased bank reserve requirements and Euro-Zone growth fell short of expectations in the fourth quarter.  The announcement by the Chinese government forced banks to set aside more deposits as reserves for a second time in the last month.  The announcement came directly after the Hang Seng Index stopped trading and therefore did not impact Chinese stocks, which fell slightly on the trading day.  After the news of China pushed European equities lower during early trading, weak growth reports from the Euro region intensified the downward pressure.  Germany announced that growth stalled in the fourth quarter, as the country’s GDP failed to rise amid expectations for a 0.2 percent increase.  Later, Italy announced that its economy actually contracted 0.2 percent in the fourth quarter, while the European Union’s statistics office in Luxembourg announced that the Euro region economy rose a modest 0.1 percent as a whole.  The bearish news, coupled with investor concerns over fiscal problems in Greece, put pressure on the Euro currency for a third consecutive day.  The sixteen-nation currency fell for a seventh time in the last eight days against the Dollar and has now declined over 5 percent against the American currency.  The greenback’s strength was a clear indicator of continued bearish sentiment in the market today, and led to a sell-off in all risky asset classes.  Crude oil fell over 2 percent by the close of European markets, while gold and silver futures sold off nearly 1 percent each.

FTSE 100                        5142.45                     -19.03                     -0.37%
British stocks fell in the week’s final day of trading as industrials and financials dropped at least 1.2 percent each.  Nearly four stocks fell for each that gained on the FTSE as investors showed concern that the economic recovery may be stalling out after weak growth data from the euro region.  Lloyds fell 3.2 percent to lead financial shares lower, while Xstrata and Vendata Resources led the decline in commodity based stocks.  Mining stocks were hurt by falling commodity prices after China, the world’s largest copper consumer and second-largest oil user, moved to further curb lending.  Copper fell as far as 3.2 percent on the London Metal Exchange.

CAC 40                            3599.07                     -17.68                     -0.49%
Trading in Paris led to a near one-half percent decline as weakness in the broader Euro economy overshadowed better-than-expected French GDP growth in the fourth quarter.  Bank shares were led lower by at least a 2 percent drop in BNP Paribas, Societe Generale, and Credit Agricole.  Shares of BNP Paribas fell for a second day after the bank was downgraded by analysts at Deutsche Bank, while bank shares in general were hurt by tightening in China and concerns over stability in the euro zone.

DAX                                 5500.39                      -3.54                     -0.06%
The German index posted the smallest decline among the major European indices, as industrials, financials, automobiles, and technology shares fell over 1 percent each.  German economic growth stalled in the fourth quarter, disappointing investors who expected a 0.2 percent rise for the quarter.  The Dow Jones Stoxx 600 Automobiles & Parts Index was the worst performing among all 19 industry groups, falling over 2 percent on the session.  Daimler and BMW, the largest luxury carmakers in the world, fell over 1 percent each.

IBEX 35                          10224.90                     -56.80                   -0.55%
Trading in Spain led to the largest decline among the major European indices, as industrials and financials shares fell over 1 percent each on concerns over the country’s debt problems and slow economic recovery.  The National Institute of Statistics announced yesterday that the country’s GDP fell 3.1 percent in the fourth quarter on an annual basis and slowed 0.1 percent on a quarterly basis.  Employment also remains concerning as the Spanish jobless rate nears 20 percent.  Obrascon Huarte, the Spanish building and infrastructure firm, was the worst performer on the index as weakness in construction firms carried over from yesterday’s session.

FTSE MIB                       21035.91                    -40.54                   -0.19%
Italy’s FTSE MIB posted a slight decline today after the country announced that its economy unexpectedly contracted 0.2 percent in the fourth quarter.  The most actively traded stocks in Milan included banks Banco Popolare and UniCredit, which fell at least 1.6 percent each after China’s decision to curb the lending activities of its banks.  Cement-maker Buzzi Unicem fell 2.8 percent after being downgraded by Gruppo Banca Leonardo, while appliance-maker Indesit furthered declines after being downgraded at Equity Sim.

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

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