The European markets closed in the green again Wednesday, extending yesterday's gains. The strong corporate earnings being reported across the pond in the U.S., particularly the strong results posted by tech giant Apple, fueled today's rally.
The euphoria over earnings helped the market to shrug off the unexpected announcement that the U.K. economy had slipped into recession and the weaker than expected U.S. durable goods order result. Bank stocks were strong performers again Tuesday and technology stocks received a boost from Apple's earnings.
European Central Bank President Mario Draghi on Wednesday appeared less optimistic on the economy than in the beginning of the month as he noted that the latest survey data highlighted "prevailing uncertainty" in the economy. Nonetheless, he chose to remain tight-lipped on more measures to support the struggling economy.
Draghi said that the ECB expects banks to use its liquidity injection of EUR 520 billion to refinance the real economy. "We trust that they will use it to refinance the real economy because that is the role of a banking system," he said during a hearing at the Committee on Economic and Monetary Affairs of the European Parliament.
The political concerns over France and the Netherlands that were at the forefront of investor's minds a few days ago took a back seat on Wednesday. There were further developments in the Netherlands today. The Dutch Queen approved the dissolution of the country's parliament, which will clear the way for new elections to take place in September.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 1.80 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, rose by 0.48 percent.
The DAX of Germany gained 1.73 percent and the CAC 40 of France closed up by 2.02 percent. The SMI of Switzerland finished higher by 0.42 percent and the FTSE 100 of the U.K. rose by 0.16 percent.
In Frankfurt, SAP finished higher by 1.60 percent, after its better than expected first quarter report. The company also said it expects non-IFRS software and software -related service revenue to increase in the range of 10-12 percent for the full year and 14-16 percent for the second quarter.
Siemens increased by 0.97 percent, following its second quarter report. The company also stated that it expects sales to increase moderately.
Commerzbank climbed by 5.38 percent and Deutsche Bank gained 2.15 percent.
In Paris, Remy Cointreau climbed by 3.67 percent. The spirits group reported a 15.6 percent rise in organic sales growth for the year through March 31.
STMicroelectronics rose by 1.80 percent, after Societe Generale upgraded the stock to "Buy" from "Hold."
Peugeot finished higher by 4.63 percent, after its better than expected first quarter report.
Shares of Societe Generale finished higher by 6.26 percent. Credit Agricole climbed by 5.94 percent and BNP Paribas rose by 5.59 percent.
Nexans sank by 8.12 percent, following its first quarter earnings report.
In London, mining stocks were among the best performers. Fresnillo climbed by 1.81 percent and Kazakhmys gained 2.86 percent. Vedanta Resources rose by 4.26 percent and Rio Tinto finished up by 1.90 percent.
In Zurich, ABB dropped by 3.21 percent. The engineering firm reported a 5 percent rise in first-quarter profit and said it was looking for profitable growth in 2012.
Credit Suisse finished down by 2.51 percent. The company reported a 96 percent drop in net profit for the first quarter, mainly hurt by fair value losses of CHF 1.55 billion before taxes resulting from a significant tightening in own credit.
The U.K. economy unexpectedly shrank in the first quarter, entering a double-dip recession for the first time since 1970s, preliminary estimate published by the Office for National Statistics showed Wednesday. Gross domestic product declined by 0.2 percent sequentially, driven by a sharp drop in construction activity. Economists had forecast a 0.1 percent expansion in GDP. This follows a 0.3 percent GDP decline in the fourth quarter of 2011.
The U.K.'s index of services, an indicator of service sector output, decreased from the previous month in February, defying economists' forecast for an increase, data from the Office for National Statistics showed Wednesday. The seasonally adjusted index of services decreased 0.4 percent month-on-month in February, contrary to economists' expectations for a 0.2 percent gain.
New orders for U.S. durable goods fell at the fastest rate in several years in the month of March, according to figures released Wednesday by the Commerce Department. Durable goods orders came in at $202.6 billion, a 4.2 percent decrease from February levels. The drop reflected the largest monthly decline since January of 2009. Most economists had expected durable goods orders to fall from February levels but generally expected a much less severe drop of around 1.5 percent.
by RTT Staff Writer
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