Airlines

European Stocks Rise on Announcement of New Greek Budget Cuts

Europe Session Key Developments

•    Greece Will Announce as Much as 4.8 Billion Euros of Cuts to Europe’s Biggest Deficit Tomorrow
•    Sterling Continues to Slide Ahead of BoE Interest Rate Decision on Thursday
•    Commodities are Generally Higher Amid Dollar Weakness and Economic Optimism

European stocks rose for a third day as Greek spokesman Giorgos Petalotis said the government will announce additional measures to reduce Europe’s biggest deficit tomorrow.  Greece will announce as much as 4.8 billion euros ($6.5 billion) of cuts, bowing to pressure from the European Union and investors.  The new measures will include higher tobacco, alcohol and sales taxes and deeper cuts in public workers’ bonus payments according to an unnamed source.  The yield on the benchmark 2-year Greek bond tumbled 19 basis points today to 5.52 percent as speculation grew that the EU will bail out Greece after the new budget cuts.  Speculation that an end to Greece’s debt crisis might be near also pushed the Stoxx Europe 600 Index 0.8 percent higher to 250.65, its highest close in a month.

On the currency front, the single currency gained today while cable continued its slide.  Midday, the euro was 0.3 percent stronger against the dollar to 1.3605 while sterling had depreciated 0.3 percent to 1.4956.  In general, the dollar index was 0.2 percent weaker.  Commodities have also gained as a group; the CRB Commodity index was 0.9 percent higher.  Precious metals and Energy provided major strength; the two groups rose 2.0 percent and 1.5 percent respectively.  Ahead for tomorrow, the Nationwide Building Society will report British Consumer Confidence and the Deutsche Bundesbank will report German Retail Sales.  The two events will provide some risk but not quite as much as both the BoE and ECB interest rate decisions on Thursday.  Though interest rate swaps are pricing in no probability of either of these banks raising rates by even 25 basis points, traders will be looking closely at the language for any signs of an increase in the scope of quantitative easing programs, particularly in the case of the BoE.

FTSE 100                         5484.06                     +78.12                     +1.45%
The FTSE 100 Index was the best performer among benchmark equity indices of Europe’s five biggest economies.  Insurance stocks were the only sector in the red while gains were led by British Airways and ICAP.  British Airways stock was up 6.2 percent as airlines across Europe gained following a lower than expected loss posted by Lufthansa, Europe’s second-biggest airline.  ICAP rose 4.6 percent after coverage of the stock was initiated at UBS with a “buy” rating.

CAC 40                            3811.92                     +42.38                     +1.12%
French stocks advanced for the third straight day, led by gains in PSA Peugeot Citroen and L’Oreal.  Peugeot, Europe’s second-largest carmaker, surged 3.4 percent after it said the year has started “better than expectations.”  The carmaker also put plans to expand in India on hold pending the outcome of talks with Mitsubishi Motors.  The pair have been exploring the possibility of Peugeot taking a stake in Mitsubishi, which is already present in India.  L’Oreal also rose on merger speculation as there has been renewed buzz about a possible bid for the company by Nestle.  L’Oreal stock was up 2.7 percent to 79.67 euros.

DAX                                 5776.56                       +63.05                    +1.10%
German stocks were led higher by automakers and airlines today as only two of the thirty issues on the DAX finished the session in the red.  Lufthansa and Bayerische Motoren Werke were among the highest gainers on the DAX benchmark index.  BMW, the world’s biggest maker of luxury cars, rose 2.9 percent to 31.34 euros after the CEO of the company said the company will focus on reaching a 1.3 million-vehicle sales goal this year.  Lufthansa rose 3.6 percent after the airline reported that it had achieved a positive operating income in 2009.

IBEX 35                          10521.50                     +86.60                   +0.83%
Retail, Media, and Insurance stocks were the only industry groups to decline today as Spanish stocks rose for a third straight day.  Commodity producers led the advance as commodities gained 0.9 percent in today’s session.  Basic Material stocks were up 2.5 percent as a group and Energy stocks were up 1.1 percent.  The biggest individual mover was Iberia Airlines, which gained 5.7 percent to follow other European airlines higher.  Another major mover was Repsol, Spain’s largest oil company, which increased 1.2 percent and contributed 7 index points to today’s advance.  In addition to higher oil prices, the company was raised to “hold” by ING.

FTSE MIB                     21431.41                       +110.61                   +0.52%
Italy’s FTSE MIB was the weakest advancer of benchmark indices of Europe’s five biggest economies.  Fiat SpA climbed 3.9 percent to 8.25 euros as automakers across Europe saw their shares get a lift today.  The Stoxx 600 Automobiles & Parts Index rose as much as 2.5 percent today, the best performance among 19 industry groups in Europe’s Stoxx 600 Index.  Italian car registrations rose 21 percent last month from a year earlier while sales of Fiat’s three main brands rose 17 percent.

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