Europe Lower on Weak Banks

Ivaylo
11 May, 2007
New York City

European markets declined on Friday led by the rate-sensitive banking sector as signals from the European Central Bank suggested that the interest rate tightening cycle was not over. The speculation about the slowing economic growth in the U.S. also hurt companies earnings as ABB and BASF paced declines by companies dependent on sales in the U.S. By mid morning, Frankfurt Xetra Dax shed 1.2%, the CAC 40 in Paris lost 1.2% and London FTSE 100 slid 0.9%.

[R]6:30AM European markets decline Friday on weak banking stocks.[/R]

European markets were lower on Friday. National benchmarks decreased in all of the 17 western European markets that were open. By mid morning, Frankfurt Xetra Dax shed 1.2% to 7,330.17, the CAC 40 in Paris lost 1.2% to 5,938.62 and London FTSE 100 slid 0.9% to 6,467.4.

Advancers

Bucking the negative trend Capitalia of Italy, which gained 1.3% after chief executive Matteo Arpe announced his bank would not stand still during the wave of consolidation in the banking sector.

German utility RWE raliied 5.5% on rumours French rival Electricite de France was interested in a takeover. RWE said it had not received an offer. Shares in EdF gained 0.6%.

B shares of Volvo, the Swedish truckmaker, added 3.9% after topping forecasts with its first-quarter net profit.

Decliners

Banks led the decliners. Shares in Fortis fell 3%, while Santander eased 0.3% and RBS lost 1.2%. ABN shares fell 0.3%.

U.S. export-oriented companies dropped. ABB fell for the first time in three days, shedding 2.1%. The Americas accounts for about a quarter of ABB revenue.

Shares of BASF slipped 1.5%. North America is the second-biggest market for BASF. Oil company BP, which generated more than a third of its sales in the U.S. in 2006, slid 1.4%.

Commodities

Crude oil gained on concern the U.S. supply of gasoline would be threatened by refinery halts and latest disruptions of production in Africa. Crude oil for June delivery rose 37 cents, or 0.6%, to $62.18 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Brent crude oil for June settlement rose 62 cents, or 0.9%, to $66.41 a barrel in electronic trading on the ICE Futures exchange.

Gold advanced in London after some investors judged that prices, which ended at a five-week low yesterday, no longer reflect expectations for a third consecutive year of declining supply. Gold for immediate delivery gained $2.38, or 0.4%, to $668.03 an ounce. Silver dropped 2 cents to $13.015 an ounce, heading for a fourth weekly decline.

Currencies

The euro and the pound retreated from recent highs against the dollar in morning trading Friday, as lack of surprise over interest rate moves in Britain, Europe and the United States boosted the U.S. currency. The euro bought $1.3477 in morning European trading, compared with the $1.3508 it bought in New York late Thursday. The British pound slipped to $1.9784 from $1.9823 the night before even though the Bank of England lifted its key interest rate by a quarter of a per cent to 5.5%. The dollar rose to 119.86 Japanese yen from 120.44 yen the night before.

[R]5:00AM Copper declines Thursday, while gold and silver plunge and copper dips.[/R]
The most-active July copper contract lost 11.25 cents to end at $3.5665 per pound on the New York Mercantile Exchange. June gold dipped $15.50 to end at $667 a troy ounce as the dollar advanced. July silver settled down 33 cents at $13.14. July platinum finished down $15.30 at $1,324.20 an ounce, while June palladium also slid $6.65 to close at $363.75 an ounce.

The June crude oil contract gained 26 cents to stop at $61.81 a barrel after reaching $62.50. June gasoline settled up 9.54 cents at $2.3261 a gallon. June heating oil closed up 4.67 cents to $1.8625 a gallon. June natural gas added 0.6 cents to finish at $7.726 per million British thermal units.

On the New York Board of Trade, July Arabica coffee futures ended up 0.35 cent at $1.0660 a pound. Most-active July cocoa shed $7 to settle at $1,922 a metric ton. Futures on raw sugar in foreign ports for July lost 0.05 cent to end lower at 9.26 cents a pound.

May corn settled down 11.50 cents at $3.4575 per bushel, July fell 11.75 cents $3.5450, and December declined 9.50 cents to $3.5650. July soybeans finished down 1.25 cents at $7.4625, and November soybeans settled 1.75 cents lower at $7.7550 a bushel.