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European Shares Set To Extend Gains

3/14/2012 3:29 AM ET

European shares are seen opening higher on Wednesday, extending the previous session's rally, after the Federal Reserve upgraded its outlook on the U.S. economy and reiterated its intention to keep interest rates at "exceptionally low levels" until late 2014. Banks could be in focus after the Fed's annual stress results demonstrated the strength of the U.S. banking system.

Labor market conditions have improved further in recent months and the unemployment rate is declining gradually, though still elevated, the Fed said after its latest policy meeting, sparking a rally in U.S. shares overnight and in Asia this morning. China's Shanghai Composite index bucked the upward trend and is currently down 2.2 percent after Premier Wen Jiabao said the government has no plans to relax property control measures.

On the macroeconomic front, industrial production and inflation from Eurozone and labor market statistics from the U.K. are the major economic reports due in the European session.

Meanwhile, the U.K. government is considering issuing new "super-long" gilts, which will have a maturity of hundred years or more, reports said citing Treasury sources.

In next week's Budget, Chancellor George Osborne is expected to unveil a plan to issue "super-long" bonds which will have a repayment date of 100 years or even longer to help "lock in" the benefits of Britain's historically low interest rates for a very long time, reports said. A typical long-term bond gives the borrower 30 years to repay the full amount.

In corporate news, pharma giant Roche Holding AG announced that it has received a request for additional information, or "second request" from the Federal Trade Commission in connection with Roche's proposed acquisition of Illumina Inc.

Fitch Ratings has downgraded French retailer Carrefour's long-term issuer default rating and senior unsecured rating to 'BBB' from 'BBB+', citing the company's weak 2011 trading performance.

German conglomerate Bayer AG said it anticipates further increases in sales and margins through 2014 in the life science areas.

Specialty chemical products company Wacker Chemie AG said it plans to invest nearly 1 billion euros during the current fiscal year to lay the foundation for its future growth.

Utility E.ON AG posted a 50 percent year-over-year drop in its full-year 2011 underlying net income to around 2.5 billion euros because of nuclear reactor shutdown and lower earnings from its power generation and wholesale gas business.

Austria-based steel materials producer Voestalpine AG said that it would end production at its Duisberg subsidiary, TSTG Schienentechnik GmbH & Co. KG, by the end of 2012 at the earliest, citing the plant's inability to produce rails competitively at the site over the long term.

Intercell AG announced the start of a pivotal phase II/III efficacy trial of its investigational Pseudomonas aeruginosa vaccine.

3W Power, the holding company of German maker of solar inverters AEG Power Solutions, issued updated guidance for the financial year 2012, with revenues and profitability for the first-quarter 2012 expected to be below first-quarter 2011 results.

European shares hit a 7-1/2-month high on Tuesday, with encouraging data on German investor confidence and U.S. retail sales fueling the liquidity-driven rally. The Euro Stoxx 50 index of eurozone bluechip stocks and the Stoxx Europe 50 index, which includes some major U.K. companies, jumped around 1.7 percent each, while around Europe, the U.K.'s FTSE 100, Switzerland's SMI, the German DAX and France's CAC 40 rose between 1.1 percent and 1.7 percent.

On Wall Street, stocks rallied overnight as traders reacted positively to retail sales data as well as the Federal Reserve's monetary policy announcement. Investors also cheered European finance ministers' approval of a second bailout for Greece worth 130 billion euros.

The Dow climbed 1.7 percent to reach its best closing level in four years and the S&P 500 jumped 1.8 percent to a three-year high, while the tech-heavy Nasdaq closed above 3000 for the first time since December 2000.

by RTT Staff Writer

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