Rate Worries Weigh on Europe

Ivaylo
13 Jun, 2001
New York City

European stocks were lower on Wednesday on a number of factors including the sharp fall on Wall Street overnight. U.S. markets declined yesterday after yields on 10-year Treasury notes surged to the highest in five years, raising fears of rising interest rates, which would weigh on the demand for equities. Allianz and British Energy led declines by insurers and utilities, among the most sensitive to higher interest rates. Alliance & Leicester and Inditex gave Europe some relief.

[R]6:30AM European stocks decline on Wednesday on interest rate fears.[/R]

European markets declined on Wednesday. The U.K. FTSE 100 index slipped 0.1% at 6,513.10, the German DAX Xetra 30 index declined 0.5% at 7,643.90 and the French CAC-40 index lost 0.3% at 5,879.90. National benchmarks fell in all 17 western European Markets that were open.

Advancers

Alliance & Leicester gained 0.9% after it upgraded core operating profit for 2007 at the top end of the forecast range as it also named finance director David Bennett as its next CEO.

Spanish clothing chain Inditex gained 1.7% after its first-quarter net profit rose 33% to 200 million euros, with sales up 19% to 2.0 billion euros. Profit of 185 million euros had been expected from the owner of the Zara and Massimo Dutti clothing chains.

Decliners

Allianz, the largest insurer in the region, slid 0.8 percent and Deutsche Bank, the largest bank in Germany, fell 0.8 percent.

Utilities fell, being most sensitive to interest rate hikes. British Energy, whose nuclear reactors can produce about a fifth of the electricity in the U.K., slipped 1.3 percent. RWE AG, Germany second-largest utility, shed 1.1 percent.

Contruction companies also suffered. Bouygues, the second-biggest construction company in the world, fell 2 percent. Skanska AB, No. 3 construction company in Europe, dropped 1.6 percent. Acciona SA, Spain fourth-biggest construction company, slid 3 percent.

Oil and gold

Crude oil traded little changed in New York on talks U.S. gasoline stockpiles advanced for a sixth straight week as refiners increased output. Oil for July delivery was down 19 cents at $65.16 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Gasoline for July delivery was at $2.13 a gallon in New York after falling 0.8 percent to $2.135 yesterday. Brent crude oil for July settlement fell 21 cents to $68.58 a barrel on the London-based ICE Futures exchange in London.

Gold traded in London at $644.10, down from $648.60 late Tuesday. Silver opened in London at $12.98, down from $13.09.

Currencies

The U.S. dollar surged against other major currencies in European trading Wednesday morning. The euro traded at $1.3271, down from $1.3318 late Tuesday in New York. The British pound traded at $1.9693, down from $1.9727. The dollar fetched 122.32 Japanese yen, up from 121.82.

[R]5:30AM Copper loses more than 2% Tuesday, gold and silver sink on profit-booking.[/R]

On the New York Mercantile Exchange, copper shed 6.9 cents to end at $3.287 a pound. Chinese imports of copper fell 28 percent in May from April. China is the greatest source of demand in the metals futures and any waning in Chinese imports unnerves the market.

Precious metals prices also retreated. Gold for August delivery shed $5.90 an ounce to settle at $653.10 on the Nymex as the U.S. dollar gained against the euro and other world currencies. Gold is considered a hedge against inflation. July silver gave up 18.5 cents, settling at $13.09 an ounce.

After crude oil futures added more than 1$ a barrel on Monday, gold lost on Tuesday on profit-taking. Light, sweet crude for July delivery fell 62 cents to close at $65.35. Gasoline futures dropped 1.63 cents to end at $2.135 a gallon.

On the Chicago Board of Trade, wheat rallied, extending gains from Monday when it advanced 28 cents. July wheat rose 9 cents to settle at $5.65 a bushel on the CBOT. July corn lost 2.4 cents a bushel to close at $3.934, while soybeans finished down 3.4 cents at $8.264 a bushel.