European Markets Rebound on ECB Hopes, Construction Report

Nigel Thomas
17 Jan, 2013
New York City

European markets recovered from the morning slide. Construction output in the euro zone declined at a slower pace in November. Leading economic conditions index in Spain showed an improvement for the third month. IMF released the next tranche for Portugal.

[R]4:00 PM Frankfurt – European markets recovered from the morning slide. Construction output in the euro zone declined at a slower pace in November. Leading economic conditions index in Spain showed an improvement for the third month. IMF released the next tranche for Portugal.[/R]

European markets recovered from early losses after the latest data on housing and employment in the U.S. pointed to a steady recovery.

Across Europe market indexes gained. Markets in Milan, Madrid, Oslo, Amsterdam and Stockholm jumped between 0.2% and 1%.

In London, FTSE 100 index increased 0.5% or 28.4 to 6,132 and in Frankfurt, the DAX index gained 44.3 or 0.6% to 7,735. In Paris, CAC 40 index soared 1% or 35.6 to 3,744.

The latest monthly bulletin from the European Central Bank said that the economy in the euro zone will begin to improve in late 2013 because of accommodative monetary policy and significantly improved financial markets confidence.

Market sentiment was bolstered by the improving economic data in the U.S. Initial claims of unemployment at the end of last week declined to the lowest level last seen in January 2008 and housing starts surged 12% in December after apartment construction soared.

Euro zone construction output declined 0.4% in November from October. The output fell to 4.1% on annual basis from a year ago month and improved from the fall of 4.7% in October, according to the latest data released by the eurostat.

Spain sold a total of €4.5 billion of 3-year bills at average yield of 2.713% compared to previous auction of 3.385% and 5-year bonds that yielded 3.77% compared to 3.988% and 2041 bonds that yielded 5.69% compared to 6.002%.

The euro traded a fraction higher after President of the European Council Van Rompuy comments suggested Europe should get back on growth track in 2013.

Leading economic index for Spain increased the third month in a row, according to the data released by the Conference Board. The index increased 0.5 percentage point from the previous month to 10.37 in November.

IMF chief Christine Lagarde said today that Greece has made progress in implementing structural reforms and added “however much reforms are needed to boost productivity and lower prices.”

Separately, the IMF released the €838.8 million in loans to Portugal as part of loan package of 78 billion approved in 2011. Deputy Managing Director Nemat Shafik said that Portugal made “considerable progress in fiscal and external adjustments.”

IMF also agreed to release next tranche of bailout of €3.24 billion to Greece after the struggling nation completed the bond buyback program.

Stocks in Review

AB Foods increased 4% to 1,615 pence after the food and clothing group said first quarter revenues increased 10%.

Carrefour gained 0.5% to €20.43 after the hypermarket operator reported 0.8% increase in fourth quarter sales to €22.9 billion after Latin America sales increased 4.8% and sales in France gained 0.6%. Sales in Europe outside France declined 2.4%. Sales in Asia soared 5.6%.

Sales including VAT in the full-year 2012 increased 1% to €86.55 billion.

Delhaize Group soared 10% to €35.05 after the supermarket operator reported fourth quarter revenues increased 0.3% and gained 2.9% in 2012. The operator of food supermarket said underlying operating profit declined 17.5% from a year ago and free cash flow is estimated to increase above €600 million.

The operator of Food Lion stores in the U.S. said, full year revenues increased 7.7% in 2012 to €22.7 billion. Sales in the U.S. increased 0.9% and comparable sales at stores declined 0.8%. Stores in South Eastern Europe soared 34% after the acquisition of Maxi stores and stron performances in Greece and Romania.

EADS added 3.9% to €33.69, a high in six years after regulators in U.S., Japan and India grounded rival Boeing’s 787 Dreamliner for investigation after a second incident involving the overheating of the battery made by GS Yuasa based in Japan.
Veolia Environnement SA increased 3% to €8.85 after the water focused company’s chief executive Antoine Frerot said that the company is ahead of its two-year plan to cut its debt and sell assets.