European Markets Higher Ahead of Earnings Season, UK Retail Sales Fall

Barry Randall
18 Jan, 2013
New York City

European markets generally closed higher as the earnings season kicks in next week. Earnings at the largest 500 companies in Europe are expected to decline 1% to flat and expectations are low. UK retail sales declined in December.

[R]4:30 PM Frankfurt – European markets generally closed higher as the earnings season kicks in next week. Earnings at the largest 500 companies in Europe are expected to decline 1% to flat and expectations are low. UK retail sales declined in December.[/R]

Financial markets in Europe closed mixed after UK reported weaker than expected retail sales and China reported improving economic data.

In London, FTSE 100 index increased 22.1 or 0.4% to 6,154 and in Frankfurt, DAX declined 33.2 or 0.4% to 7,702. In Paris, CAC 40 index fell 0.1% or 2.5 to 3,742.

Of the 18 markets in Europe, nine closed higher.

Markets in Asia traded higher and the index in Hong Kong gained 1.1% and in Tokyo surged 2.9%. The Sensex index in Mumbai gained 0.4%.

China reported gross domestic product increased 7.9% in the fourth quarter from a year ago according to the National Bureau of Statistics in Beijing. The increase was the largest after seven quarters of weakness.

Weak UK Retail Sales Lift Prospect of Recession

UK retail sales declined unexpectedly in December after lackluster holiday period sales.

December retail sales including fuel declined 0.1% from November and rose 0.3% from a year ago month according to the latest data released by the Office for the National Statistics.

Sales in the fourth quarter declined 0.6% from the third quarter of 2012. Excluding fuel, retail sales declined 0.3% in the month. The data included a week when HMV Group Plc and Blockbuster Entertainment Ltd entered bankruptcy administration.

Online sales increased to 10% of total retail sales and rose 1.2 percentage point from a year ago month.

Expectations for January are not high with the inclement weather in most of the UK and UK faces another shutdown of factories and empty shopping malls for another week and the repeat of late 2010.

Economists were quick to cut the estimate of economic growth in the fourth quarter and are looking for a decline of as much as 0.4% in GDP and many are looking for another quarterly decline in the first quarter.

Stocks in Review

Banks in Paris trading closed higher after Morgan Stanley swung to quarterly profit. BNP Paribas increased 1.6% and Societe Generale and Credit Agricole gained.

Broker downgrade dragged ABB in Stockholm and Enel in Milan trading.

Mediaset SpA, the Italy based broadcaster soared 6% to 2.02 euros after a Berenberg Bank lifted its prices target to 2.60 and reaffirmed its buy rating.

Metro AG, the Germany’s largest retailer declined 2% after the stock was cut to “underperform” at Credit Suisse.

Ophir Energy increased 2.7% to 540 pence on the hopes that the UK based company may discover oil and gas fields in Gabon and Tanzania.

Renault SA increased 2% after the French automaker said it plans to return to sales growth this year.

Rio Tinto gained 2.5% to 3,523 pence on the speculation that the company may return cash to shareholders a day after the miner forced out its chief executive and took a charge of $14 billion on two failed acquisitions.

Spectris Plc gained 7% to 2,169 pence after the maker manufacturing testing equipment maker said comparable sales increased 4% in the fourth quarter from a year ago.

Telenet, the Belgian cable operator declined 3% to 35.83 euros after Liberty Global said it will not revise its offer of 35 euros a share for the remaining 50% stake in the company it does not own for 2 billion euros.