Europe Declines on Rate Fears

Ivaylo
17 Apr, 2007
New York City

European markets declined on Tuesday as strong economic growth in the eurozone and UK buoyed concerns over inflation and hiking interest rates. In Germany, the ZEW index of business sentiment surged in April prompting faster economic growth over the next six months and in the UK consumer price inflation increased to 3.1% in March. By midday, Frankfurt Xetra Dax shed 0.5%, the CAC 40 in Paris lost 0.6% and London FTSE 100 slid 0.7%.

[R]6:30AM European stocks slipped Tuesday on concerns over likely rate increases.[/R]
European markets declined on Tuesday. By midday, Frankfurt Xetra Dax shed 0.5% to 7,305.5, the CAC 40 in Paris lost 0.6% to 5,825.2 and London FTSE 100 slid 0.7% to 6,469.6. National benchmarks fell in 15 of 17 western European markets that were open.

Advancers

French carmaker Peugeot advanced 3.4% after Morgan Stanley upgraded the company from equal weight to overweight. ABN was itself 1% higher after reports the Dutch Bank would likely extend its period of merger talks beyond the informal deadline on Wednesday.

Tesco rose 0.9%. The U.K. biggest retailer reported a gain in full-year profit to 1.89 billion pounds, or $3.8 billion after the company expanded stores and sold more organic food and clothing.

Remy Cointreau rose 1.1%. The second-largest liquor maker in France said fourth-quarter sales increased 2.2% as the company sold more Remy Martin cognac and Charles Heidsieck champagne.

Decliners

Telecom Italia fell 2.3% after AT&T, the largest US telecoms operator, pulled out of talks with Pirelli about buying part of its stake in TI’s holding company Olimpia. Shares in Pirelli were down 3.1%.

Danone fell 2.3% after the French food producer had its price target reduced by ABN Amro, due to its dispute with Chinese joint venture partner Wahaha.

Merck retreated 2.1% after UBS lowered its recommendation for the German drugmaker to neutral from buy.

Oil and precious metals

Crude oil climbed in New York on speculation demand for fuel is rising ahead of the summer driving season. Crude oil for May delivery rose 54 cents, or 0.9%, to $64.15 a barrel in after-hours electronic trading on the New York Mercantile Exchange and was at $64.07 in early trade in London. Brent crude oil for June settlement increased as much as 59 cents, or 0.9%, to $67.84 a barrel in electronic trading on the ICE Futures exchange.

Gold prices declined in London as some investors deemed excessive a rally that took the metal close to an 11-month high. Silver, platinum and palladium also dropped. Gold for immediate delivery in London fell $2.55, or 0.4%, to $687.65 an ounce. Silver for immediate delivery fell 5 cents, or 0.4%, to $14.00 an ounce. Platinum for immediate delivery fell $10.50, or 0.8%, to $1,268 an ounce, while palladium dropped $8, or 2.1%, to $371.50 an ounce.

Currencies

The British pound broke past $2 in European trading Tuesday morning for the first time since 1992 but the dollar gained some ground against the euro. The pound surged after official data showed consumer price inflation rose to 3.1% in the year ending in March, increasing the likelihood of another interest rate increase by the Bank of England next month. In early trade the pound had retreated to $1.9982, up from $1.9900 late Monday in New York. The euro traded at $1.3530, down from $1.3549. The dollar fetched 119.29 Japanese yen, down from 119.79.

[R]5:30AM Gold finishes higher Monday on dollar weakness, palladium declines.[/R]
June gold rose $4.60 to finish at $694.50 a troy ounce on the New York Mercantile Exchange. Silver declined with May silver shedding a penny to close at $14.08 an ounce after earlier trading $13.82 an ounce. July platinum gained $3.10 to $1,289.50 an ounce, while June palladium lost $2.05 to $379 an ounce. In trading of base metals, May copper advanced 0.75 cent to settle at $3.5395 per pound.

In Nymex energy trading, crude oil futures finished lower after reports that Nigerian production was on course to rise in the coming weeks. The May crude oil contract lost 2 cents to settle at $63.61 a barrel. May heating oil dipped 4.14 cents to settle at $1.8593 a gallon. Natural gas for May delivery ended 27.1 cents lower at $7.530 a million British thermal units Monday, slipping some 3.5% during floor trading.

Arabica coffee futures declined sharply. May coffee ended 3.35 cents lower at $1.0845 a pound, while July coffee was off 3.45 cents at $1.1120 a pound. May raw sugar closed 0.20 cent lower at 9.70 cents a pound, while July sugar finished 0.28 cent weaker at 9.59 cents a pound.