S&P

European Stocks Retreat amid Continued Growth Concerns as FOMC Decision Looms

Europe Session Key Developments

• Concern Over Chinese Growth Hurts Stocks
• Uncertainty Regarding FOMC Decision Weighs on Risk Appetite

European Stocks Retreat amid Continued Growth Concerns as FOMC Decision Looms

During yesterday’s trading session, equities had benefitted from the possibility that further stimulus from the Federal Reserve would support economic growth; however, the same logic did not carry through today’s trading session. Investors fled riskier assets in favor of safer ones, such as U.S. treasuries, whose yields continued to venture lower. Today’s auction of $34 billion worth of 3-year notes is expected to offer historically low yields, potentially below 0.81 percent, displaying the degree of concern that remains in the market amid what Fed Chairman Ben Bernanke refers to as “unusual uncertainty.” Global economic releases did little in the way of stimulating demand for risk. China’s trade surplus ballooned to $28.7 billion in July from just $20.02 billion in June, highlighting the contrast between the growth prospects in the world’s two most important economies. Slowing imports in China revealed that the pace of recovery there may be slowing, which induced a sell-off in global equities. Overall, all major European equity indices closed lower on Tuesday; the CAC 40 led the decline after yearly French Industrial and Manufacturing Production figures came in worse-than-expected, at 5.7 and 5.0 percent respectively (vs. 7.3 and 7.0 percent expected).

Looking ahead, the Federal Open Market Committee’s rate decision due at 16:15 GMT will likely guide the remainder of the U.S. equity session and could potentially move European indices tomorrow. The FOMC will almost definitely keep the overnight lending rate at 0.00-0.25 percent, but many believe the Committee may enact some small-scale quantitative easing measure. It remains to be seen how the market will price in the decision; while a commitment to further stimulus would be beneficial to companies worldwide, such an action would also highlight the dire state of the U.S. economy. Tomorrow’s economic release schedule is relatively quiet with the exception of the U.K.’s Claimant Count Rate (4.5 percent expected) and the Bank of England’s Quarterly Inflation Report. For weeks, the BoE has kept its benchmark interest rate steady at 0.50 percent in the face of domestic inflation exceeding its 2 percent target.

FTSE 100                      5376.41                   -34.11               -0.63%

As technical indications had suggested, the FTSE 100 was unable to hold on to its gains above the psychologically significant 5400 (see yesterday’s wrap-up for an illustration). The British index gave back 34.11 points, or 0.63 percent, to close at 5376.41. The basic materials sector was the worst performing of all of the FTSE’s ten sectors; it lost an astounding 2.22 percent during Tuesday’s trading session. Shares of Rio Tinto, the world’s third largest mining company, fell 1.97 percent, while BHP Billiton PLC, the world’s largest mining company, watched its share price fall 2.31 percent. GlaxoSmithKline finished 2.17 percent higher to finish at 1177 in London.

CAC 40                     3,730.58                  -46.79                 -1.24%

The CAC 40 was the worst performing European equity index on Tuesday, suffering from disappointing domestic economic releases discussed above. The French index lost 46.79 points, or 1.24 percent, to finish the day at 3730.58. The CAC has proven unable to successfully break resistance around 3800, a level it has not closed above since before the ‘flash crash’ back in early May. Nine of the index’s ten sectors finished lower; the health care sector was the lone sector that managed to close higher, gaining 0.30 percent as a whole. The financial companies were the worst performers on the day, losing an aggregated 1.83 percent. Shares of Societe Generale lost 2.78 percent, while BNP Paribas saw its share price fall 1.69 percent on Tuesday.

DAX 30                        6286.25                    -65.35           -1.03%

After testing resistance by the 6380 level earlier in the week, the DAX 30 now sits nearly 100 points below that mark. During Tuesday’s trading session, the German index retraced 65.35 points, or 1.03 percent, to close down at 6286.25. Today’s decline came in spite of an in-line with expectations domestic Consumer Price Index; a measure of monthly CPI came in at 0.3 percent. All nine of the DAX’s sectors finished lower on Tuesday; the index was particularly weighed by its consumer goods sector, which lost 1.43 percent. Automobile manufacturers BMW and Daimler AG led the way, losing 2.17 and 1.78 percent respectively. The DAX is still 5.52 percent higher in 2010, making it the only European equity index to remain positive on a year-to-date basis.

IBEX 35                     10718.50                   -94.10                -0.87%

The IBEX 35 finished 94.10 points, or 0.87 percent, lower on Tuesday to close at 10718.50. Nine out of the index’s 10 sectors finished lower on the day, with the healthcare sector acting as the only bright spot, gaining 0.79 percent. However, this sector only comprises 0.41 percent of the broader IBEX’s weight and as a result, had very little impact on the index’s overall performance today. The financials sector, which composes over 40 percent of the Spanish index, lost 0.97 percent intraday. Banco Santander, the nation’s largest bank, lost over 1 percent before closing at 10.16. The industrials companies listed on the IBEX also contributed to its decline; the industrial sector gave back 1.92 percent, making it the worst performing sector of all on Tuesday.

S&P/MIB                        21359.89                   -81.73                  -0.38%

The S&P/MIB retraced nearly one third of yesterdays 257 point increase during today’s trading session. The Italian index closed at 21359.89, down 81.73 points, or 0.38 percent. The MIB is now down 8.55 percent year-to-date, making it the second-worst performing major European equity index (the IBEX 35 is down 10.23 percent).

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

S&P

European Stocks Jump Ahead of FOMC Meeting

Europe Session Key Developments

• German Trade Data Shows Bump in Exports
• Euro-Zone Sentix Investor Confidence Surges

European Stocks Jump Ahead of FOMC Meeting

European equity markets gained on Monday as trade data from Europe’s largest economic state boosted recovery optimism. German Trade Balance figures from June showed a further increase in the surplus, edging up to €14.1 billion from €9.8 billion in May. While Imports increased over the same period, Exports increased by a greater amount, up by 3.8 percent. In what was a particularly quiet day for newsworthy data releases, the Euro-zone Sentix Investor Confidence reading for August surged to 8.5 from -1.3 in July, outpacing a Bloomberg forecast of 1.6. As the results of the CEBS Banks’ Stress Tests have fully begun to sink in, it appears that sentiment has gathered that the health of the European financial sector is strong enough to hold off a ‘double-dip recession,’ despite continued problems that excess sovereign debt might pose to the economic union. Overall, all five major European equity markets were up over 1.2 percent, with the French exchange gaining the most, up 1.65 percent.

Looking forward to Tuesday, there are several events which pose risk to market volatility. Early in the European session, German inflation data will be released, with the Consumer Price Index for July expected to rise 1.1 percent as ECB key interest rates remained on hold. Both French Manufacturing and Industrial Production are expected to increase from June in the previous year, though month-over-month data remains muddled. The British Trade Balance is expected to improve, from -£8062 million in May to -£7800 million in June. Finally, what could prove to be market moving later in the session, U.S. Wholesale inventories figures for June is expected to increase by 0.4 percent; high Wholesale Inventories indicate that unsold goods are piling up, suggesting that retailers are facing lagging consumer demand and unwilling to purchase goods.

FTSE 100                      5410.52                   +78.13               +1.47%

The FTSE 100 finished up 78.13 points, or 1.47 percent, breaking through the 5400 level before closing at 5410.52. The British index now sits just 0.04 percent lower year-to-date. Though the recovery from May’s ‘flash crash’ has been relatively steady thusfar, the FTSE has failed to hold on to any upside momentum beyond 5400. During today’s trading session, all ten of the sectors that comprise the FTSE 100 finished higher; the consumer goods and financials sectors were the top performers, gaining 1.84 and 1.73 percent, respectively. Barclays PLC, one of the nation’s largest banking institutions, saw its share price add 3.20 percent to close at 335.00. Shares of embattled oil giant BP posted a 1.74 percent increase to close at 432.75 in London.

CAC 40                       3,776.33                  +60.28                 +1.62%

The CAC 40 index opened nearly 50 points higher on Monday, and then proceeded to float within a tight range of 3760-3780 before closing near the upper bound at 3777.37. The 60.28 point (1.62 percent) increase was a stark turnaround from the near 50 point selloff on Friday. While all ten of its sectors gained, the French index was pushed higher by its financials and oil & gas sectors, which gained 1.97 percent and 1.91 percent, respectively. Shares of BNP Paribas, the country’s largest bank, closed 2.24 percent higher at 56.96. Total S.A. (FP), an international leader in oil & gas exploration, benefitted from the improvement in investor sentiment. The company’s share price posted a 2.00 percent gain to close at 40.81.

DAX 30                        6351.60                    +91.97           +1.47%

After dropped almost 74 points on Friday, the DAX 30 index more than retraced its decline by posting a 91.97 point, or 1.47 percent, increase today. The German index now sits 6.62 percent higher in 2010, making it the top performing European equity index and the only one to remain positive on a year-to-date basis. The DAX seems poised to re-test the critical 6380 level, which has served as resistance since early April. Though all nine of the index’s sectors finished higher Monday, the industrials sector fare especially well, adding 2.19 percent during intraday trading. Siemens AG, one of Germany’s largest manufacturers, gained 2.76 percent to close at 78.45, just below its 52-week high of 79.65.

IBEX 35                     10812.60                   +161.50                +1.52%

The IBEX 35 gained 161.50 points, or 1.52 percent, during intraday trading to finish at 10812.60. The Spanish index opened nearly 150 points higher, which almost completely retraced the index’s loss on Friday following the disappointing U.S. Non-Farm Payrolls report. On Monday, all ten of the IBEX’s sectors gained; the consumer goods and industrials sectors were the top performers, posting a 1.98 percent and 1.92 percent increase, respectively. Gamesa Corporacion Technologica (GAM SQ), a manufacturer of wind turbines, was the only company listed on the IBEX whose share price declined; it finished at 6.44, down 0.39 percent.

S&P/MIB                  21341.62                   +257.15                  +1.22%

The S&P/MIB posted a remarkable 257.15 point, or 1.22 percent, gain on Monday, finishing the trading session at 21341. Despite falling nearly 100 points at the beginning of the US session, the Italian index managed to re-assert itself and hold on to its gains from earlier in the session.

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

S&P

European Stocks Tumble as Data Weighs on Recovery Optimism

Europe Session Key Developments

• German, UK Industrial Production Falls Short of Forecasts
• U.S. Labor Market Continues to Shed Jobs, though Unemployment Holds

European Stocks Tumble as Data Weighs on Recovery Optimism

European equity markets fell on Friday, shedding some of their gains from early week jumps as data across the globe disappointed investors. Industrial Production data from both Germany and the UK showed signs of contraction, contrary to slight expansion forecasted, according to a Bloomberg survey. UK Industrial Production withdrew by 0.5 percent in June versus 0.1 percent expansion expected, after rising by rising by 0.7 percent in May. The trend was similar in Germany, where Industrial Production was expected to by 0.5 percent for July but in fact declined by 0.6 percent. Despite these data, both Bank of England and European Central Bank policy makers were upbeat yesterday in their assessment of their economies, believing that while recent numbers suggest improvement across all industries, accommodative monetary policy must continue for some time. However, in what proved to be the most market moving data on Friday, the U.S. labor market continued to show signs of a choppy recovery, with Non-Farm Payrolls declining by 171 thousand jobs. Although both U.S. Private Payrolls and Manufacturing Payrolls expanded in July, buoying the Unemployment rate at 9.5 percent, European equity markets fell across the board upon the data release. Overall, all five major markets declined, with the IBEX dropping the most, down nearly one-and-three-quarters of a percent.

Looking to Monday, only two events from Europe likely will influence equity markets. First, German Trade Balance data for June is due, which, buoyed by a weaker Euro and strong exports, is expected to increase to €12.0 billion. Later in the session, the Euro-zone Sentix Investor Confidence measure for August is forecasted to rise to 2.0 from -1.3 in July.

FTSE 100                      5332.39                   -33.39               -0.62%

The FTSE 100 index declined again during intraday trading, losing another 33.39 points, or 0.62 percent, to finish at 5332.39. The British index now sits down 1.49 percent year-to-date after managing to turn positive last week. Nine of the FTSE’s 10 sectors lost on Friday. The consumer goods sector particularly weighed on the index, losing 1.52 percent during intraday trading. Unilever PLC (ULVR LN), one of the U.K.’s largest manufacturers of branded and packaged consumer goods, lost another 2.71 percent after dropping 5.19 percent yesterday.  The telecommunications sector acted as the lone bright spot, adding 0.94 percent. Vodafone Group managed to gain 1.13 percent to close at 152.25; the company’s share price is now testing its 52-week high of 153.80 that was set back in April.

CAC 40                       3,717.73                   -46.46                 -1.23%

The CAC 40 suffered a 46.46 point, or 1.23 percent, selloff on Friday to finish the week at 3717.73. It now stands down 5.55 percent year-to-date. The French index traded sideways until the shocking U.S. Non-Farm Payrolls report, when it dropped over 60 points in a matter of minutes. The CAC’s utilities sector was the worst performer, losing 2.05 percent. The sector has now given back nearly all of its gains from earlier in the week. Only 2 of the 40 companies listed as part of the CAC 40 finished higher on Friday, the more notable being Societe Generale. The bank’s share price 0.30 points, or 0.65 percent, to close at 45.52.

DAX 30                        6259.63                    -73.95                 -1.17%

On Friday, the DAX 30 dropped 73.95 points, or 1.17 percent, to close at 6259.63. The German index now sits 5.07 percent higher year-to-date, making it the only major European equity index to remain in positive territory in 2010. Prior to dropping 100 points after the NFP report, the DAX tested the significant 6380 level but failed to break though. The health care sector was the only sector that managed to finish higher on Friday; it edged up a modest 0.08 percent. The index was weighed by its consumer goods sector, which lost 1.82 percent. Daimler AG and Volkswagen lost 2.75 percent and 2.15 percent, respectively.

IBEX 35                     10651.10                   -188.90                -1.74%

The IBEX 35 was the worst the biggest loser out of all the major European equity indices on Friday. The Spanish index lost 188.90 points, or 1.74 percent, to end the week at 10651.10. It is now down 10.79 percent year-to-date. Though all of the IBEX’s ten sectors finished lower, the financial companies’ performance was particularly disappointing.  The financial sector, which accounts for over 40 percent of the entire index, gave back 2.25 percent during intraday trading. Shares of Banco Santander, the nation’s largest bank and the index’s largest holding (22.69 percent), lost an astounding 2.60 percent to close at 10.11.

S&P/MIB                21084.47                    -218.50                  -1.03%

The S&P/MIB dropped 218.50 points, or 1.03 percent, to finish at 21084.47. The Italian index had opened the day up nearly 200 points, but after the disappointing economic release out of the United States, it dropped 400 points before closing at its current level. The MIB is now 9.31 percent lower in 2010.

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

S&P

U.S. Equities Decline on Jobless Claims, Chain Store Sales

U.S. Session Key Developments

•    Initial Jobless Claims Rise Last Week By Most in Three Months
•    July ICSC Chain Store Sales Decline From Month Prior
•    Commodities Continue Ascent, Led By Surging Wheat Prices

U.S. stocks declined for a second day this week as an unexpected rise in American initial jobless claims and continuing claims stoked concerns that the U.S. recovery is stalling.  The weakness in equities caused the Dow Jones Industrial Average to dip to 10674, while the S&P 500 fell to 1125.  The jobs data, released by the Labor Department one hour before U.S. trading began, showed that initial jobless claims rose by 19,000 to 479,000 in the week ended July 31, the most since April and worse than the most bearish economic forecasts.  Continued claims were also higher than expected, rising to 4.53 million in the week ended July 24.  The employment data seemed especially concerning to investors today, due to concerns that it could be a bearish precursor to tomorrow’s nonfarm payrolls release at 12:30 PM GMT.  The consensus estimate is for a drop of 65,000 in July nonfarm payrolls, compared to a decline of 125,000 in the month prior.  Furthering the bearish case today was the ICSC Chain Store Sales release, which showed that sales at 30 chain stores climbed 2.8 percent in July, falling short of last month’s 3.0 percent gain.  The data fell short of forecasts and further eroded sentiment, sending risky assets lower and pushing the two-year Treasury note yield toward an all-time low, at 0.53 percent.

On the commodities front, agriculture continued its strong showing, led by wheat contracts, which rose over 7.9 percent to $815.25 on the CBOT.  The move came after an announcement from Prime Minister Vladamir Putin that Russian farmers would no longer be allowed to export the commodity due to the country’s worst drought in 50 years.  Other commodity classes posting strong gains today included metals, led by 1 percent gains for aluminum and copper, while silver and gold futures rallied 0.4 percent and 0.1 percent on the COMEX, respectively.  The active gold contract closed the day above the $1197 level, a seventh consecutive gain for the yellow metal and its highest closing price since July 15.

DJIA 30                      10,674.98                    -5.45                -0.05%
The Dow Jones Industrial Average dipped slightly lower today, as sixteen of its 30 bluechip stocks closed lower on the day.  American Express posted the largest decline, dropping over 2 percent after hinting at possible changes to its financial targets.  Other firms pulling down the index included Pfizer, which fell 1.5 percent, and Microsoft which declined 1.4 percent.  Caterpillar, on the other hand, posted the largest gain on the Dow, rallying 1.1 percent after announcing an expansion and new hiring at a North Carolina factory.

S&P 500                               1,125.81                               -1.43                      -0.13%
The broad-based S&P 500 fell for a second time this week, led by a 0.4 percent decline in financial shares.  Bank stocks were especially weak, dropping over 0.5 percent after Goldman Sachs announced it may spin off part of its proprietary trading operations into an independent entity.  The investment bank’s share price fell by 0.5 percent as a result, while shares of U.S. Bancorp and Bank of America dropped over 1 percent.  Furthering index weakness today were retailers, led by a 7.7 percent decline for J.C. Penney, after the third-biggest U.S. department-store announced a 0.6 percent decrease in July sales.

NASDAQ                              2,293.06                               -10.51                    -0.46%
The tech-heavy Nasdaq posted the biggest loss among major U.S. indices, dropping nearly half of one percent on weakness in technology shares.  Research in Motion contributed heavily to the move, falling over 2 percent to $52.23, its lowest closing level since July 8.  Shares of the Blackberry maker have dropped over 30 percent since April.

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

S&P

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

S&P

European Equities Gain Now That Stress Test Uncertainty is Gone – Or is it?

Europe Session Key Developments

• Investors Continue to Digest Friday’s Stress Test Results
• Newfound Risk Appetite Drives Equities Modestly Higher

European Equities Gain now that Stress Test Uncertainty is Gone – Or is it?

The Committee of European Banking Supervisors’ bank stress tests failed to trigger the price action many had expected from the long-awaited report. Perhaps this was a result of the convenient timing of the release, which was after Friday’s close of the European equity markets, when only North American traders had just a few illiquid hours to digest all 55-pages. However, even after the weekend, investor sentiment was still largely undecided regarding the results of the bank stress tests.

Many investors have questioned the accounting practices employed by the CEBS, which has led to questions regarding the “stressfulness” of the stress tests. The methodology used in the test ignored the possibility of a sovereign debt default, as officials claimed the European Union would never allow for such an event to occur. Recall that, according to Friday’s report, only seven of the 91 banks tested failed had failed; five of the seven were Spanish Cajas, one was an already nationalized Greek bank, and the last was the government-controlled German Hypo Real Estate. To some, it seems unreasonable that in the event of an “adverse scenario” (the situation devised by the CEBS to represent the worst ‘what-if’ imaginable), only one Greek bank would fail in light of the nation’s recent sovereign debt crisis. Regardless, countless officials in Europe have praised the test and asserted that it proves the “robustness” of the European financial system.

European equities responded Monday by closing higher across the board, though the sustainability of such a move is still in question. It will be interesting to see if any form of rally will surface on the (allegedly) more stable economic playing field. Here’s how the specific indices performed:

FTSE 100                      5351.12                   +38.50               +0.72%

The FTSE 100 finished another 38.50 points higher, or 0.72 percent, to close at 5351.12 after intraday trading. The British index’s recent performance has been impressive, as it is only down 1.14 percent on a year-to-date basis. The index was led higher by its financial and oil & gas sectors, which gained 1.66 percent and 1.44 percent respectively. The financial sector, which accounts for over 20 percent of the entire FTSE 100, was led higher by Barclays PLC, which gained 4.52 percent today. The announcement that embattled BP chief executive Tony Hayward would step down sent the company’s stock markedly higher, gaining 4.60 percent. The index’s Health Care sector was the main underperformer, losing 0.94 percent, led by Glaxo’s 1.26 percent retracement.

CAC 40                     3,636.18                  +29.13                 +0.81%

The CAC 40 index closed 29.13 points higher, or 0.81 percent, after Monday’s trading session. The French index was led by its impressive financial sector, which gained a remarkable 2.92 percent today. The sector’s performance is likely attributable to Friday’s bank stress test results, in which no French banks failed. Societe Generale was the most impressive individual performer, managing to gain 5.24 percent. Shares of BNP Paribas added 2.37 percent today to close at an even 51.00, back above the midpoint of its 52-week range.

DAX 30                        6194.21                    +27.87           +0.45%

The DAX 30 added another 27.87 points today, or 0.45 percent, to close at 6194.21. The German index remains the only major European equity index to remain in positive territory year-to-date, up 3.97 percent. As was the case with the FTSE and the CAC indices, the DAX was led higher by its financial sector. The sector gained 1.19 percent intraday, led by Commerzbank, which added 3.46 percent. The financial sector’s success can also be attributed to Friday’s CEBS report; Hypo Real Estate was revealed to be the only German bank to fail the stress test. The index’s basic materials sector was the worst performing sector; it lost 0.35 percent on Monday.

IBEX 35                     10506.70                   +118.50                 +1.14%

The IBEX 35 was the top performing European equity index on Monday, adding over 118 points, or 1.14 percent, to close back above 10500. The Spanish index is particularly vulnerable to the performance of its financial sector, which comprises over 40 percent of the entire index by weight. As such, today’s dramatic increase is not surprising; financial service companies and banks outperformed across the board today. BBVA was a noteworthy performer, adding 2.54 percent to close at 10.09. Banco Santander, the nation’s biggest bank, gained 1.04 percent. The only sector to finish lower was basic materials sector, which lost 0.70 percent.

S&P/MIB                        20819.96                    +215.88                  +1.05%

The Italian index gained a remarkable 215.88 points, or 1.05 percent, following the results of the CEBS’ stress tests. All Italian banks managed to pass, which sent to the MIB higher Monday. Despite its recent surge above the psychologically significant 20000 level, the index remains down 10.45 percent year-to-date.

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

S&P

U.S. Stocks Gain on Increased Earnings Forecasts

U.S. Session Key Developments

•    Home Sales, Leading Indicators Beat Expectations
•    Profit Forecasts Raised For Multiple Firms
•    Crude Oil Rallies To Eleven-Week High

U.S. stocks followed their European and Chinese counterparts higher, as better-than-expected home sales and improved earnings forecasts helped boost investor sentiment regarding the economic recovery.  The positive news sent stocks on the Dow Jones Industrial over 1 percent higher to 10322, while shares on the S&P 500 gained over 2 percent to 1093.  On the earnings side, companies ranging from United Parcel Service Inc. to AT&T Inc. improved their earnings outlooks as executives see growing demand from overseas.  Qualcomm shares, for example, rose 8.2 percent as the chipmaker said today that it expects higher profits and selling prices for its products this year.  As for the economic docket, home sales fell 5.1 percent in June to a 5.37 million annual rate, but this decline was better than the 9.9 percent decrease expected.  It was the second consecutive monthly decline for purchases, which may continue to struggle as the federal incentives to buy homes cease.  Also released today was the leading indicators, which declined 0.2 percent, less than the 0.3 percent drop expected.  Leading indicators, which point to the direction of the economy over the next 3-6 months, have declined in 2 of the past 3 months.

DJIA 30                         10,322.30                              +201.77                         +1.99%
The broad-based Dow Industrial Average rallied nearly 2 percent today, led by Boeing Co. which rallied over 5 percent to $66.  The Chicago-based planemaker announced that it won over 200 jetline orders worth nearly $30 billion at this week’s Farborough Air Show.  This was more than three times the number of orders announced in Paris a year ago and showed a huge rebound in demand.  Other firms posting large gains on the day included American Express, which rose 4.9 percent, and Du Pont, which added over 3 percent.

S&P 500                         1,093.67                               +24.08                           +2.25%
The S&P 500 posted its largest gain since July 7, as all ten of its index sectors closed in the black.  AT&T gained over 2 percent after announcing that its 2Q profits beat analyst estimates, while the KBW Bank Index rose nearly 4 percent on a positive quarterly profit release from Fifth Third.  Shares of Xerox and 3M Co. climbed 7 percent and 3 percent, respectively, after each company boosted its full-year revenue forecast.

NASDAQ                        2,245.89                             +58.56                           +2.68%
Shares on the tech-heavy Nasdaq posted the largest gain among major U.S. indices, as Microsoft announced fourth-quarter earnings that topped analyst estimates.  Furthering bullish momentum for the technology sector was Qualcomm, which added over 8 percent after raising its 2010 profit forecast and reporting better-than-expected third quarter sales.

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

S&P

U.S. Stocks Rebound As Traders Look Towards Bernanke Speech

U.S. Session Key Developments

•    Market Participants Await Fed Bernanke’s Semiannual Senate Address Tomorrow
•    Housing Starts Fall in June to Lowest Level Since October
•    Crude Oil Rallies For Second Day, Gold Rebounds Nearly 1 Percent

U.S. stocks rallied today, erasing an initial slide following worse-than expected housing starts and building permits data.  Investors looked past the data and towards Federal Reserve Chairman Ben Bernanke’s Senate address tomorrow, speculating that the Fed Chairman would announce new plans to help revive the economy.  The positive sentiment helped boost equities, driving the S&P 500 over 1 percent higher to 1083, while the Dow Jones Industrial Average gained 0.7 percent to 10229.  One rumor circulating regarding Bernanke’s speech tomorrow, is that the central bank plans to cease paying interest to private bank reserves currently being held at the Fed.  This maneuver would, in theory, encourage banks to lend out that money into the real economy because there would be no payout for holding it as reserves within the Fed.  Such a move could provide a major boost to asset prices and help ward off deflationary forces that many economists see as problematic in the current economic environment.

The Fed rumors had an immediate impact on commodities, as energy and precious metal prices moved higher on the session.  Crude oil rallied 1.1 percent to $77.44, while gold rose 0.8 percent to $1192.  As for Treasuries, the 2-year and 10-year yields declined 1 basis point each to 0.576 percent and 2.948 percent, respectively.  The 30-year yield was unchanged at 3.978 percent.

DJIA 30                         10,229.96                              +75.53                         +0.74%
The broad-based Dow Industrial Average rallied for a second day as twenty-three of its thirty bluechip stocks closed higher.  Home Depot led the index with a 3.1 percent gain, while retailer Walmart and aluminum giant Alcoa rose over 2.5 percent each.  IBM was the biggest laggard, declining 2.5 percent on weak 2Q earnings, while Pfizer and Johnson&Johnson dropped over 1 percent each.

S&P 500                         1,083.48                               +12.23                           +1.14%
The S&P 500 posted the largest gain among the major U.S. indices today, as nine of its ten sectors closed higher on the day.  Health care stocks were the lone exception, but their losses were trumped by a 3 percent rise in basic materials shares and at least 1.5 percent gains for industrials, consumer goods, and energy stocks.  Gold and copper miner Freeport McMoRan rallied over 5 percent to boost basic materials, as investors speculate on further quantitative easing from the Federal Reserve.

NASDAQ                        2,222.49                             +24.26                           +1.10%
Shares on the tech-heavy Nasdaq rallied as technology shares gained 1.2 percent.  Shares of search engine giant Google gained over 3.3 percent on the day, while Apple rebounded from a sour two weeks, closing 2.6 percent higher.

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

S&P

Global Equities Slump as U.S. Confidence Hits Eleven-Month Low

U.S. Session Key Developments

•    University of Michigan Consumer Confidence Falls to Lowest Level Since August 2009
•    Consumer Prices Decline in June for Third Consecutive Month
•    Japanese Yen Rises to a 2010 High Versus Greenback

U.S. stocks posted their worst day since June 29, following weakness in foreign markets and an unexpectedly poor consumer confidence reading from the University of Michigan.  The S&P 500 shed 2.8 percent to 1064, continuing the bearish momentum that began with a 2.8 percent plunge for Japan’s Nikkei 225 overnight.  The main catalyst for risk aversion during the U.S. session was the University of Michigan’s confidence indicator, which showed that consumer confidence unexpectedly fell from 76.0 to 66.5 in July, its lowest reading in eleven months.  The reading showed that a record-low share of Americans expect their incomes will rise in the next 12 months, making a strong rebound in consumer spending seem unlikely.

As for commodities, the risk sell-off led to a third consecutive decline in crude oil prices as well as declines in precious metals despite their “safe haven” qualities.  NYMEX Crude fell 0.9 percent to $75.87, while COMEX gold shed 1.3 percent and COMEX silver dropped 2.7 percent to close at $1192 and $17.85, respectively.  The U.S. Dollar Index, on the other hand, ended a three-day skid, while the Japanese Yen gained against all of its major cross-currencies.  U.S. Treasuries also rallied, as 10-year bond yields fell to 2.923 percent.

DJIA 30                         10,097.90                              -261.41                         -2.52%
The broad-based Dow Industrial Average fell for a second day as all thirty shares on the index closed in the red.  Bank of America plunged 9.1 percent to lead the descent, on news that the bank’s second quarter revenues fell short of analyst expectations.  Other stocks falling sharply on the Dow were American Express, General Electric, and Home Depot, which fell over 4 percent each.

S&P 500                         1,064.88                               -31.60                           -2.88%
The S&P 500 gave back all of its gains this week, as financials plunged 4 percent and industrial, basic materials, and consumer services dropped over 3 percent each.  Seventy-one of the largest seventy-two S&P companies by market cap closed lower, with Goldman Sachs being the lone exception after settling its pending SEC lawsuit after hours yesterday.  Overall, the S&P index is down 4.5 percent year-to-date.

NASDAQ                        2,179.05                             -70.03                           -3.11%
Shares on the tech-heavy Nasdaq posted the largest loss among major U.S. indices as technology shares declined over 3 percent.  Google plunged 6.9 percent after the internet search giant’s second quarter earnings missed analyst estimates, while Research in Motion, Cisco, and Dell dropped over 4 percent.

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

S&P

U.S. Equities Reverse Morning Losses, Goldman Sachs Settles SEC Suit After Hours

U.S. Session Key Developments

•    Goldman Sachs Pays Record $550 Million to Settle SEC Suit
•    Financial Reform Regulation Passes Following 60-39 Senate Vote
•    Initial Jobless Claims Fall to Lowest Level Since August 2008

U.S. stocks managed to overcome weakness in Asia and Europe today, as the S&P 500 rallied to its highest closing level since June 21.  Initially, the index fell to 1080 as a better-than-expected jobless claims report failed to overcome weakness in foreign equities overnight.  The S&P then traded flat for most of the day until the bulls found their footing in the last 30 minutes, pushing the S&P to a 1096 close.  Overall, investors appeared more confident about the fate of the U.S. financial sector, as JPMorgan Chase beat its 2Q earnings estimates and financial regulation finally found the 60 votes needed to pass the Senate floor.  Although some analysts believe the financial reform bill could reduce bank profits, many realize that Wall Street avoided a “tougher” bill and the current bill’s passage provides clarity to investors.  Furthering bullish sentiment in financial shares, was a rumor that Goldman Sachs would be settling its SEC lawsuit with the U.S. government after trading closed.  Forty minutes after close, the SEC announced that Goldman agreed to pay a record $550 million and change its business practices to settle claims that it misled investors in collaterized debt obligations linked to subprime mortgages.  Goldman Sachs acknowledged it made a “mistake” and that marketing materials for certain financial instruments had “incomplete information.”

As for the economic docket, initial jobless claims fell to 429,000 in the week ended July 10, the lowest level since August 2008 and better than the expected reading of 438,000.  Continuing claims, on the other hand, rose to nearly 4.68 million in the week ended July 3, worse than the 4.44 million expected reading.  Also disappointing investors was a drop in Empire Manufacturing from 19.57 to 5.08 in July and a decline in the Philadelphia Fed Index from 8.0 to 5.1 in the same month.  Also released this morning were wholesale prices, which fell 0.5 percent in June, signaling a lack of inflationary pressures in the current economic environment.

DJIA 30                         10,359.31                              -7.41                         -0.07%
The broad-based Dow Industrial Average closed lower for the first time since July 2, as a 2.1 percent decline in Travelers and a 1.7 percent drop in Bank of America shares weighed on the index.  Overall, ten of the thirty index stocks closed in the red.

S&P 500                         1,096.48                               +1.31                           +0.12%
The S&P 500 was the lone major U.S. index to close higher today, thanks to strong gains for utilities and consumer services.  Nextera Energy and American Electric rose over 1 percent each to lead utilities, while Target shares rose 2.3 percent to boost consumer services.

NASDAQ                        2,249.08                             -0.76                           -0.03%
Shares on the tech-heavy Nasdaq dipped slightly lower on today’s session, although technology stocks closed up 0.03 percent.  Blackberry-maker Research in Motion gained over 1.4 percent to lead the major tech stocks, while shares of NetApp also added over 1 percent.

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

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