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U.S. Equities Close Near 12-Week High as Investors Await Results of FOMC Meeting

U.S. Session Key Developments

•    Speculation Arising that Fed May Introduce Another Round of Quantitative Easing
•    No data releases for U.S. Leaves Room for Recovery Optimism

U.S. Equities Close Near 12-Week High as Investors Await Results of FOMC Meeting

U.S. equity markets built on last week’s rally on Monday, with each index pushing further into positive territory for 2010. The NASDAQ gained the most, up three-quarters of a percent, while both the DJIA and S&P gained approximately one-half of a percent. The three indices are now at levels not seen for the past 12-weeks, as significant rallies by the Pound, Euro, and commodity currencies have exhibited renewed investor confidence in financial markets. Although some economists believe that the recovery is slowing, as evidenced by slowing factory orders, and an expected increase in U.S. Wholesale Inventories, sentiment is gathering that as long manufacturing and service indicators continue to show signs of expansion, growth will be sustained, and earnings will be boosted in the remaining months of 2010. The DJIA is now up 2.60 percent on the year, while the S&P and NASDAQ are up 1.14 percent and 1.61 percent, respectively.

Going forward, tomorrow could prove volatile as a flurry of U.S. economic data will be released during the Tuesday session. Nonfarm Productivity data for the second quarter is expected to show an increase, up 0.2 percent, though down from the 2.8 percent reading previously. IBD/TIPP Economic Optimism, a measure of small business confidence, is expected shortly after the session open. The Federal Open Market Committee Rate Decision, though expected to hold the key interest rate at 0.00-0.25 percent, will likely provide the greatest amount of event risk in the session. Although no change in rate is anticipated, investors are interested in the FOMC’s rhetoric going forward; it is expected that the Federal Reserve may expand stimulus for some time. Finally, in what is typically held lightly due to its release after the market close, the ABC Consumer Confidence reading for the period of August 8 will be announced at 17:00 EST. Currently, Confidence sits at -50.

DJIA 30                     10,698.75                      +45.19                       +0.42%

The Dow Jones Industrial Average gained 45.19 points, or 0.42 percent, during intraday trading to close at 10698.75. After opening nearly 40 points higher, the index entirely retraced its early move within the first 30 minutes of the session before advancing steadily to close just below 10700. The DJIA 30 was led by Cisco Systems, whose share price added 2.78 percent to close at 24.76. Hewlett-Packard was the worst performing company listed as part of the Dow; HP’s shares lost an astounding 8.01 percent following the announcement that Chief Executive Mark Hurd would be leaving the company in the aftermath of recent sexual harassment allegations. The company’s share price is testing its 52-week low of 41.94, ending the session trading at 42.59.

S&P 500                       1,127.78                        +6.14                         +0.55%

The broad-based S&P 500 finished up 6.14 points, or 0.55 percent, to close at 1127.78 after Monday’s trading session. The S&P now sits at its highest level since May amid speculation the FOMC might introduce new quantitative easing measures to stimulate growth at its meeting tomorrow. All ten of the index’s sectors posted gains today, with the telecommunications and consumer services sectors outperforming the rest. Sprint Nextel led the way, gaining 2.92 percent intraday to close at 4.58. Shares of Sprint have gained over 25 percent year-to-date, making it one of the top performing companies listed on the S&P 500.

NASDAQ                     2,305.69                       +17.22                       +0.75%

The NASDAQ outperformed its American counterparts on Monday, adding 17.22 points, or 0.75 percent, to close at 2305.69. The tech-based index has been unable to hold on to its gains beyond the significant 2300 level in recent weeks, but a breakout may be on the horizon (see below). Shares of Research in Motion (RIMM) surged following an announcement the company would cave to Saudi Demands regarding its privacy policy. The company saw its share price gain 3.50 percent intraday to close at 55.32.

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

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U.S. Equities Reverse Decline in Afternoon Trading

U.S. Session Key Developments

•    Euro Rallies Late on ECB Commentary
•    Crude Oil For June Delivery Falls to $70 a Barrel
•    U.S. Dollar Index Rises to Highest Level Since April 2009

U.S. stocks closed higher for the first time since Wednesday as rhetoric from the European Central Bank eased concerns of fiscal deterioration in the euro zone.  The Dow reversed its 184-point decline from the morning session, closing up 5 points on the day at 10,625.  The major turning point for risk sentiment was much needed transparency from the ECB, which revealed details of its plans to absorb excess liquidity from ongoing bond purchasing programs.  The central bank said it will invite European banks to place cash in ECB holdings for one week to prevent ECB bond purchases from swelling the money supply.  The commentary had ripple effects throughout the markets, as stocks rallied and the euro reversed from an intraday low of $1.2235 to the $1.2400 level.  The short-term revival of risk appetite slowed the buying of precious metals as a “safe haven”, causing a slight decline in gold futures to $1224.

DJIA 30                     10,625.83                        +5.67                       +0.05%
The Dow Jones Industrial Average closed slightly higher on the day despite only fourteen of the thirty index stocks trading in the black.  AT&T, Kraft, and American Express rallied over 1.4 percent on the session, while shares of Procter & Gamble, Walmart, and Home Depot gained at least 1 percent.  Alcoa and Caterpillar were the worst performing stocks, dropping over 1.7 percent each following a weak Empire Manufacturing reading for May.

S&P 500                       1,136.94                           +1.26                       +0.11%
The broad-based S&P 500 posted a fractional gain as the telecommunications sector gained 1.1 percent on the day and consumer goods and services rose 0.7 percent.  Telecom shares were led by a 3.7 percent gain for MetroPCS and a 2.9 percent rally for Sprint Nextel.  Gains in the consumer sector were led by a 9.6 percent rally for the Apollo Group, after news broke that U.S. Education Deputy Undersecretary Robert Shireman will resign his post.

NASDAQ                     2,354.23                          +7.38                       +0.31%
Shares on the tech-heavy Nasdaq posted the largest gain among U.S. indices as technology shares rallied 0.2 percent.  The heavily-weighted shares of Applied Materials and Broadcom Corporation helped pace the tech sector with 1 percent gains.

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

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Perspective on Greece

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European Equity Markets Closed For Easter Holiday

Europe Session Key Developments

•    European Equities Markets Closed for Easter Holiday
•    Crude Oil Trades Above $86 a Barrel, Precious Metals Gain on Dollar Weakness
•    Sterling Continues Ascent Versus Greenback
•    Euro Declines Slightly, Pushes EURUSD Rate Below $1.35

Most European stock markets were closed today for the Easter holiday, but there was action in the currency markets following a better-than-expected U.S. home sales report for February and a strong ISM reading for March.  Investors cheered the bullish news, buying up riskier assets such as equities and commodities and selling U.S. dollar holdings, driving the U.S. Dollar Index down to 81.12.  The British Pound gained against the Dollar for the sixth time in seven sessions, pushing the GBPUSD exchange rate over $1.528.  The euro did not perform as well, however, declining versus the greenback for a second day on expectations that the U.S. Federal Reserve will tighten its monetary policy before the European Central Bank does.  By day’s end, market swaps implied an expected 90 basis point hike by the Fed over the next twelve months, while only a 65 basis point increase by ECB policy makers over the same time frame.

Looking ahead to the re-opening of stock markets tomorrow, there are a few key economic releases that could drive sentiment.  At 7:15 GMT, Switzerland will release its CPI reading for the month of March, and at 8:30 GMT, the Euro Zone’s Sentix Investor Confidence report will be released for the month of April.  Economists expect a 1.4 percent annual rise in Swiss inflation for March and an increase from -7.5 to -5.2 for the April Sentix Confidence reading.

FTSE 100                         5744.89                     –.–                     -.–%

CAC 40                             4034.23                     –.–                     -.–%

DAX                                    6235.56                     –.–                     -.–%

IBEX 35                          11067.90                    –.–                     -.–%

FTSE MIB                     23206.31                    –.–                     -.–%

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

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U.S. Equities Generally Lower as European Officials Struggle with Greece Situation

U.S. Session Key Developments

•    European Union Leaders Continue to Discuss Greece Bailout and Possible IMF Assistance
•    Continuing Jobless Claims Higher Than Expected in First Two Weeks of March
•    Treasuries Falter on Weak Seven-Year Auction, U.S. Dollar Index Closes Above 82 Level

U.S. stocks disappointed for a second day as EU officials struggled to agree on the actions necessary to avoid a full-blown fiscal crisis in Greece.  The uncertainty spooked investors during the U.S. session and contributed to a near 2 point decline in the index to 1,165.  The main contention in talks today centered around use of the IMF to contribute to a bailout package.  French and German officials came to an agreement that would make European nations responsible for approximately half of all aid to Greece, while the Washington-based IMF would provide the rest.  ECB President Jean-Claude Trichet strongly resented the move, however, saying that any IMF help would be “very, very bad.”  The euro currency erased early gains following the Trichet commentary and closed lower against the U.S. dollar for a third consecutive day.

U.S. stocks initially traded higher on the session, despite a worse-than-expected continuing claims report for the week ended March 13.  The S&P traded above the 1180 level intraday, but Trichet’s comments quickly turned sentiment sour.  Furthering the bearish case in the afternoon was a weak U.S. Treasury sale of 7-year notes which only drew 3.374 percent and a 2.61 bid/cover ratio.  Traders sold off longer-term U.S. debt for a second day, as 10-year yields and 30-year yields each rose 3 basis points to 3.87 percent and 4.75 percent, respectively.  As for currencies, the greenback continued its strong run, pushing the U.S. Dollar Index to its highest close since May.  The Japanese Yen was especially weak, dropping nearly half a percent against the Dollar.

DJIA 30                     10,841.21                             +5.06                       +0.05%
The Dow Jones Industrial Average was the only U.S. index to close higher today, on a mixed session in which sixteen of the 30 Dow stocks gained.  Disney shares posted the strongest gain on the index today, rallying over 2 percent, while Microsoft and American Express added 1 percent each.  Du Pont was the biggest laggard today, dropping 2.4 percent, while Alcoa fell 1.4 percent and Pfizer shed 1.2 percent.

S&P 500                         1,165.73                             -1.99                        -0.17%
The broad-based S&P 500 fell for a second consecutive day as basic materials and energy shares dropped over 1 percent each despite steady commodity prices.  Consol energy shares plunged nearly 6 percent for the worst performance among basic materials shares, while Peabody Energy and Massey Energy fell nearly 5 percent.  Titanium Metals fell 4.7 percent, snapping a four-day rally for the stock.

NASDAQ                     2,397.41                             -1.35                       -0.06%
Shares on the tech-heavy Nasdaq ticked slightly lower overall due to weakness in commodity stocks and telecommunications.  Technology shares managed to gain 0.1 percent, however, as shares of Qualcomm gained over 4.8 percent on the day.  The chipmaker boosted its fiscal second-quarter outlook today, citing strength in its licensing business and improved chip sales.

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

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U.S. Equities Trim Weekly Loss On Fourth Quarter GDP Revision

U.S. Session Key Developments

•    U.S. Fourth Quarter GDP Revised Higher to 5.9 Percent, Personal Consumption Lower
•    Existing-Home Sales Drop in January, Chicago Business Gauge Better-Than-Expected
•    Commodities Trade Higher as Greenback Falls Against Major Cross Currencies

U.S. stocks posted a slight gain in the final day of trading this week, as estimates for fourth quarter economic growth were shown to be higher than previously thought.  Despite today’s gain, however, the S&P 500 closed the week down 0.4 percent to 1,104.  The market-moving GDP revision was announced one hour before the opening bell and showed that the U.S. economy expanded 5.9 percent in the fourth quarter of 2009, better than the 5.7 percent initial estimate.  The GDP data was revised higher thanks to stronger business investment in the quarter and a greater contribution from inventories.  The personal consumption aspect, however, was revised lower to 1.7 percent from a 2.0 percent initial reading.  Overall, stocks traded mostly sideways during the session as other economic data released today was mixed.  The Chicago Purchasing Managers Index unexpectedly rose from 61.5 to 62.6 in February, but the University of Michigan Confidence indicator fell in the month and existing home sales disappointed for January.  Home sales were expected to rise 0.9 percent in January but instead were shown to have fallen 7.2 percent, after declining 16.2 percent in the month prior.

Globally, stocks had a strong day as the major European indices and China’s Hang Seng Index each traded at least 1 percent higher.  Investor risk appetite made a strong return as commodities joined stocks in trading higher across the board.  Crude oil prices gained for the third time this week, adding nearly 2 percent to $79 a barrel, while gold futures posted a second consecutive gain and closed the week near the $1120 level.  As for currencies, the U.S. Dollar was generally weak, falling against most of its major counterparts, including the euro.  The U.S. Dollar Index fell for a third consecutive day, but held above the 80 level for a seventh consecutive session.

DJIA 30                     10,325.26                      +4.23                       +0.04%
The Dow Jones Industrial Average closed slightly above even on a low-volume trading day.  Volume on U.S. exchanges today was slightly under 8 billion shares, 11 percent less than the 2010 average due to a snow storm in New York City and the surrounding area.  JPMorgan Chase led the index with a 3.2 percent gain after analysts at Barclays recommended buying the bank’s shares.  The bullish commentary led to a near full percent gain among financial shares.  Other stocks that outperformed the index included General Electric and drug maker Merck, which each added 0.8 percent on the day.  The worst performer on the index was Kraft Foods, which fell over 1.3 percent on the day.

S&P 500                     1,104.49                         +1.55                         +0.14%
The broad-based S&P 500 posted a small gain in the final day of trading this week on strength in financials and basic materials shares.  Financials rose nearly 0.7 percent on bullish commentary from Barclays analysts as well as commentary from Fed Chairman Ben Bernanke in the past two days that suggested rates would remain low for the foreseeable future.  The basic materials sector added 0.3 percent today, as commodities generally traded higher during the session.  Mining company Freeport McMoRan gained over 1 percent, while Barrick Gold Corp. added 0.2 percent on higher precious metals prices.  On the downside, AIG fell 10 percent for the biggest loss  on the index after posting a fourth-quarter net loss of $8.8 billion.

NASDAQ                     2,238.26                         +4.04                         +0.18%
The tech-heavy Nasdaq was the best performer among major U.S. indices as technology stocks posted a slight gain.  Among the heaviest-weighted fifteen tech stocks on the index, smart phone competitors Research in Motion and Apple posted the largest gains.  Shares of each company rose at least 1.2 percent as shares of Palm, another smart phone competitor, sank on news that company sales may be very weak this year.  Qualcomm was the worst performer among the large Nasdaq tech stocks, dropping 1.3 percent on the session.

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

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European Stocks Generally Higher on Industrial Orders, U.S. Fed Comments

Europe Session Key Developments

•    U.S. Fed Chairman Bernanke Says Interest Rates to Remain Low For Foreseeable Future
•    Standard & Poor’s Says It May Downgrade Greece’s Credit Rating
•    Europe Industrial Orders Unexpectedly Climb, Boosted by Machinery Demand
•    Euro Rises Against Greenback, Cable Falls

European stocks were mostly higher today on surprisingly strong industrial orders data for the region and commentary from U.S. Fed Chairman Ben Bernanke that indicated low rates would remain for the foreseeable future.  Equity markets in France, Germany, Italy, and the U.K. rallied for the first time this week, while Spanish stocks fell for a third consecutive session.  Investor sentiment increased during the early hours of trading after Germany announced a rise in its GfK Consumer Confidence Survey, as the index rose from 3.0 to 3.2 in March.  The European Union’s statistics office in Luxembourg announced soon after that the region’s industrial orders unexpectedly rose 0.8 percent in December.  The surprise increase was led by a rise in demand for machinery and capital goods and boosted investor confidence regarding the strength of Europe’s recovery.  As a result, both stock and commodity prices closed slightly higher, as crude oil returned to $80 a barrel and agricultural products gained.  Gold, on the other hand, closed below the $1100 mark for the first time in seven sessions despite Dollar weakness.  The U.S. Dollar Index posted its second loss in three days, closing just above the 80 level for a sixth straight session.

In the final hour of today’s trading, investors cheered comments out of the U.S. from Fed Chairman Ben Bernanke that interest rates would remain low going forward.  The Fed Chairman stated that the country’s “nascent” recovery, as seen by low rates of resource utilization and high unemployment, would require low rates “for an extended period.”  This commentary offset lingering concerns for European investors that their region’s own economic recovery still faces serious hurdles.  Unemployment in the region remains above 10 percent, and sovereign debt issues have gone unaddressed thus far.  EU leaders may be forced into action soon, however, as Standard & Poor’s said today that it will consider downgrading Greece’s credit rating in the near future.

FTSE 100                         5342.92                     +27.83                     +0.52%
British stocks traded higher today for the first time this week on strength in the technology and financial sectors.  Leading financial shares higher was Lloyds Banking, which gained 3.4 percent as investors await the company’s earnings reports tomorrow.  HSBC Holdings followed suit, gaining 2 percent as investors await its earnings next week.  Shares of HSBC, Europe’s largest bank, have rallied for eight consecutive days.  Technology shares were the second-strongest sector today as Sage Group and Autonomy Corp. gained at least 1.4 percent each.

CAC 40                             3715.68                     +8.62                     +0.23%
French equities closed higher today despite higher-than-expected job losses in December, as technology shares gained over 1.8 percent.  STMicroelectronics posted a 2.6 percent gain to lead tech stocks, while Cap Gemini and Alcatel-Lucent gained at over 1 percent each.  Yesterday, STMicroelectronics introduced a new family of highly efficient power rectifiers to help power-suppy companies achieve energy-efficient approvals.

DAX                                  5615.51                    +11.44                     +0.20%
German stocks posted a small gain after a final reading confirmed that the country’s economy stalled in the fourth quarter of 2009.  Fresenius Medical Care posted the largest gain on the DAX, adding over 4 percent on news that the company would double its budget for acquisitions to $400 million this year.  Volkswagen was the next strongest DAX performer today, gaining 1.6 percent after setting aggressive sales goals yesterday for its growing line of products.  Volkswagen also received a ‘Canadian Car of the Year’ award.

IBEX 35                          10254.00                     -58.90                     -0.57%
Trading in Spain led to the only decline among major European indices as financials fell over 1.3 percent.  Spanish banking giants BBVA and Banco Santander both dropped over 1 percent after Barclays Capital reduced its outlook on the financial institutions.  Barclays analysts downgraded BBVA from “overweight” to “underweight” and cut Banco Santander from “equalweight” to underweight”.  Telecinco continued its volatile trading of the last few weeks, dropping over 2.2 percent today.

FTSE MIB                     21346.31                     +122.24                    +0.58%
Italy’s FTSE MIB gained for the first time this week despite disappointing retail sales in December.  Trading in Milan led to a near 3 percent gain for STMicroelectronics after BofA-Merrill Lynch kept the chipmaker as its top pick for the industry.  Banco Popolare gained 2 percent after an upgrade from Banca Akros, while investment bank Mediobanca added 2.8 percent on better-than-expected net income.

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

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US Equities Drop On Lower Commodity Prices

U.S. Session Key Developments

•    Ben Bernanke May Signal Prolonged Low Interest Rate Environment
•    Commodities Fall Led By Natural Gas and Precious Metals

US Stocks were lower today for the first time in five days.  Last week, the S&P 500 and Dow Jones Industrial Average both gained at least 3 percent, their biggest gains since November.  Initially, equity index futures were pointing to a higher open amid speculation the Federal Reserve Chairman Ben Bernanke may signal U.S. interest rates will be kept near a record low.  However, stocks spent most of the day in negative territory as lower commodity prices dragged down commodity shares.  The CRB Commodity Index was down 0.4 percent led by declines in soft commodities, precious metals, and natural gas.  The three were down 2.96 percent, 0.98 percent, and 2.85 percent respectively.  In the precious metals space, gold was down 0.8 percent and silver was down 1.2 percent.  The two metals have a high negative correlation to the dollar, which didn’t hold today as the dollar index actually gave up 0.1 percent.  However, the greenback did gain marginally against the euro, which represents the US’s largest trading partner.  In store for tomorrow are reports on US Consumer Confidence as well as US House Prices.  Both are key indicators of the continued strength of the economic recovery.

DJIA 30                      10,383.38                   -18.97                          -0.18%
The Dow Jones Industrial Average was down for the first time in five days.  Chevron, which produces and transports natural gas, contributed the most to the Dow’s decline as natural gas prices fell 2.85 percent.  The company’s shares were down 1.47 percent.  JP Morgan and Bank of America both gained over 2 percent as the companies would benefit tremendously from a prolonged low interest rate environment.

S&P 500                       1,108.01                         -1.16                            -0.10%
Only two of the ten industry sectors were up today as the broad-base Standard and Poor’s 500 Index was down 0.1 percent.  Financial and industrial stocks were the only sectors to advance with Financials up over 1 percent.  The sector gained as investors expect Bernanke to signal that U.S. interest rates will be kept near record lows when he testifies in front of Congress on Wednesday and Thursday.  A prolonged low interest rate environment would benefit banks tremendously.

NASDAQ                     2,242.03                       -1.84                           -0.08%
The tech heavy Nasdaq Composite posted the smallest lost of the three biggest U.S. benchmark indices as tech stocks lost only 0.1 percent.  Just under half of all tech stocks listed on the index were up today.  Oracle contributed the most to the sector’s advance as the company’s shares gained 2 percent.  This weekend, CEO Larry Ellison said he has high expectations for Sun Microsystems, the unprofitable hardware maker that Oracle bought last month for $7.5 billion.  Ellison was questioned about the acquisition in a press conference following his return to San Francisco after the billionaire successfully recaptured the America’s Cup trophy for the United States.

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

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European Equities Rally Fourth Straight Day, Euro Drops

Europe Session Key Developments

•    UK Reports Surprising Budget Deficit
•    Spain and France Issue New Government Debt
•    Euro Breaches Nine Month Low Against the Dollar

European equities advanced for the fourth straight day while government bonds fell amid more sovereign debt issuances.  The Dow Jones Stoxx 600 Index, the gauge for European stocks, gained 0.6 percent—its eight advance in nine days.  National benchmark equity indices rose in 17 of the 18 western European markets with Iceland as the lone exception.  Bond yields also rose—and bond prices fell—as France and Spain issued 11 billion euros ($15 billion) of new sovereign debt.  Additional pressure was put on bonds as Britain posted an unexpected deficit and Greece’s budget woes lingered.  The U.K. government reported that spending exceeded revenue by 4.3 billion pounds ($6.7 billion) last month after tax receipts tumbled.  Following the news, yields on Greek 10-year bonds increased as much as 19 basis points to 6.57 percent, the highest since February 9^th.

Equities trimmed gains after the US labor department reported that last week’s initial jobless claims surprisingly increased by 31,000 to 473,000.  However, the biggest stateside news came after US markets closed when the Fed surprised everyone with a hawkish move to raise the discount rate by 25 basis points.  The single currency, which had been lower for most of the day against the dollar, shot to as low as 1.3502 before finding support at the even level.  Today’s close marks a new nine-month low for the single currency.

FTSE 100                         5325.09                     +48.45                     +0.92%
British stocks rallied today on the heels of higher commodity prices.  The benchmark FTSE 100 index was led higher by producers of basic resources.  The sector was up 1.83 percent as all 12 names advanced.  BHP Billiton, the world’s largest mining company, gained 1.92 percent to add 3.28 index points—the most in the sector.  Most metals were up today despite a stronger dollar.  British Petroleum was up 0.79 percent for another 3.31 index points as crude prices advanced to 79.06 for a gain of 2.24 percent.  BT Group, the UK’s largest fixed-line company, dropped 1.2 percent after Standard and Poor’s lowered the company’s long term credit rating to the lowest level of investment grade.

CAC 40                            3747.83                     +22.62                     +0.61%
Four of five issues gained as the CAC advanced for the fourth straight day.  Tech stocks led today’s advance as the sector gained almost 3 percent.  Cap Gemini, Europe’s largest computer services company, rose 6.2 percent to lead the sector higher.  The company posted a 60 percent drop in full year net income but expects revenue to resume growth in the second half of the year.  Financials were down 0.66 percent, the lone sector to decline today.  Societe Generale, France’s second largest bank, fell 7.2 percent, its largest drop in 9 months.  The bank cut its dividend to 25 cents a share after writedowns linked to risky assets weighed on fourth-quarter profits.

DAX                                 5680.41                       +32.07                    +0.57%
German stocks were led higher today by health care stocks, which gained 1.69 percent.  Overall, 28 out of the 30 issues advanced.  Health care stocks were led higher by Fresenius, which rose 2.6 percent to 50.07 euros.  The only stock to perform better was K+S, the world’s biggest salt producer, which gained 3.4 percent to 45.78 euros.  Meanwhile, Daimler slumped 4.7 percent, its biggest decline since October and the biggest move on the DAX today.  The company reported a fourth-quarter loss, missing an analyst estimate of a profit of 254.6 million euros.

IBEX 35                        10574.20                     +75.60                    +0.72%
Spanish equities gained today as the government successfully issued 5 billion euros of new benchmark bonds.  The bond issue may have quieted some investor concerns as the government plans to cut spending to reel in its budget deficit.  Basic materials stocks led Spanish equities higher.  The sector gained over 2 percent as commodities continued this week’s rally.  Obrascon Huarte and ArcelorMittal both gained 2.27 percent for the best performances on the benchmark IBEX 35.

FTSE MIB                      21686.12                    +35.31                    +0.16%
Italy’s FTSE MIB increased for the fourth day despite debt concerns in the European Monetary Union’s third largest economy.  Italy’s Audit Court issued a warning late Wednesday that derivative contracts used by Italian municipalities could magnify debt and imbalances over time.  The FTSE MIB, Italy’s benchmark equity index, posted the smallest increase of benchmark indices in the five largest European Union economies.  Shares in Telecom Italia and Bulgari both posted notable gains; both rose 2.3 percent.  The former gained for a third straight session after Bernstein upgraded the company’s shares to “outperform” from “market perform.”

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

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European Equities Drop Most Since Early December

Europe Session Key Developments

•    U.K. Jobless Claims Fall the Most Since 2007, Unemployment Rebounds
•    Euro Continues Stumble After China Tightens Lending, Greece Debt Outlook Deteriorates
•    U.S. Earnings Continue to Disappoint

European markets were hammered on Wednesday despite positive economic data from the fourth quarter coming from Britain. U.K. Jobless Claims for December fell by over fifteen thousand, and the Unemployment Rate for November was revealed to have rebounded to 7.8 percent from 8.0 percent. Despite this, speculation of a slowdown of stimulus policies, led by a Chinese move to raise interest rates today, fueled a global sell-off of equity securities. In particular, commodities, and accordingly, Basic Materials companies, posted the largest losses across the major European markets as investors feared demand would weaken throughout the year. Financials also moved lower across Europe after Bank of America released earnings halfway through the European session, which indicated that it continued to lose money in the fourth quarter, in spite of improving credit conditions.

Looking forward, a moderate supply of economic data due on Thursday could help move the markets positive once again. German and the broader Euro-zone Purchasing Manager Indices are set to be released, all expected to show slight increases from the previous period. A bevy of British financial data is due, among them the M4 Money Supply for December, which points to a 8.90 percent increase from the year previous.

FTSE 100                      5420.80                   -92.34               -1.67%
British stocks fell for the first time this week despite data showing a rebound in employment. Even as the Unemployment Rate gained to 7.8 percent in November, positive sentiment among investors was offset by news earlier in the day from Asia suggesting that China will continue to draw down on its stimulus measures. Basic Materials were hit the hardest, falling 4.67 percent on risk aversion. Overall, all ten sectors dropped, with Consumer Goods, Oil & Gas, and Financials posting the next three largest losses, down 1.10 percent, 1.50 percent, and 2.12 percent each. Xstrata and Rio Tinto, both mining companies, posted losses of 6.2 percent and 4.3 percent, respectively. Other movers on the day included Johnson Matthey, which dropped 3.5 percent after Credit Suisse downgraded its shares to “underperform,” and William Hill, which gained 3.4 percent on better-than-expected fourth-quarter revenue.

CAC 40                     3928.95                   -80.72                 -2.01%
Trading in Paris today resulted in the largest drop for the French index in more than two months, declining just over two percent to 3928.95. With global recovery sentiment weakening after news that China is likely to wind down its stimulus policies, the Basic Materials sector dropped 3.43 percent amid speculation that demand for commodities is likely to diminish. Nine of ten sectors lost on the day, with five sectors losing more than two percent each. Technology posted the only positive day, gaining 0.31 percent on Wednesday. Alstom dropped 4.2 percent after Morgan Stanley cut is recommendation to “equal-weight,” while Renault fell 3.9 percent as its stock was cut to “sell” at UBS. Among the winners on the day was Groupe SEB, surging 8.3 percent for its biggest gain since June.

DAX                         5851.53                    -124.95             -2.09%
German equities fell for the first time in three days as the DAX dropped the most since November amid stimulus concerns. Investors heeded to further contraction fiscal stimulus policies as the government announced it would cut spending on renewable energy projects by at least fifteen percent. Overall, eight of nine sectors dropped on Wednesday, good for a 2.09 percent retreat. Phoenix Solar, a company that builds and operates solar plants, fell 6.0 percent following the government decision. Deutsche Bank and Commerzbank each lost more than 2.0 percent following worse-than-expected Bank of America earnings, which emerged late in the session. Other losers included ThyssenKrupp, Germany’s biggest steelmaker, as it dropped 3.0 percent following a report showing that it won’t reach full production at its North American production facilities due to soft North American demand.

IBEX 35                     11709.00                   -313.60                 -2.61%
Wednesday proved to be the worst day in five months for the Spanish index, which dropped 2.61 percent, the largest fall among the five major European equity markets. Retreats from eight of ten sectors on the IBEX contributed to the index’s most precipitous fall since August, with five sectors falling two and one-half percent or more. Basic Materials fell over three and one-half percent as commodities struggled following news of the Chinese plan to curb lending. Banco Santander dropped 3.4 percent, its biggest decline in more than one month. Banco Bilboa Vizcaya Argentaria skidded  2.7 percent to its lowest closing price in over a month after the Spanish lender announced it was considering taking a write down on its American subsidiaries.

S&P/MIB                        23126.02                     -579.65                 -2.45%

Notable Europe Event Risk / Economic Releases

Written by Christopher Vecchio, CFDTrading Research
Please send any comments about this report to Cvecchio@fxcm.com

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