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European Markets Turned Negative In The Afternoon

5/3/2012 12:02 PM ET

The European markets got off to a positive start Thursday and traded in the green for the majority of the session. The markets reversed direction in the afternoon, after the weaker than expected ISM non-manufacturing report from the U.S. The European Central Bank's decision to maintain rates was expected, however Mario Draghi offered no indication that further monetary easing would be forthcoming.

The European Central Bank refused to budge on interest rates Thursday morning, despite mounting pressure to ease monetary policy in support of the region's troubled economy. The Governing Council led by ECB President Mario Draghi kept the main interest rate unchanged at a record low 1 percent. The decision was in line with economists' expectations. Draghi said there was no discussion of any kind of interest rate move today.

Some economists had expected Draghi to hint at restarting the ECB's bond purchases program, known as the Securities Market Program. He said the program is neither eternal nor infinitive.

Spain raised EUR 2.52 billion from medium-term debt auction, exceeding the EUR 2.5 billion maximum target. However, yields increased from the prior issue. The Treasury said Thursday that it received EUR 979 million from the auction of bonds maturing in July 2015 and EUR 764 million from January 2017 bonds. The average yield on 3-year bonds rose to 4.037 percent, from 2.617 percent on March 1. The yield for 5-year bonds came in at 4.752 percent, up from 3.565 percent.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.16 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, closed up by 0.01 percent.

The DAX of Germany dropped by 0.24 percent and the CAC 40 of France lost 0.09 percent. The FTSE 100 of the U.K. finished higher by 0.15 percent, but the SMI of Switzerland dipped by 0.18 percent.

In Frankfurt, BMW climbed by 0.86 percent. The automaker's first-quarter profit rose on strong demand from Asia.

Lufthansa decreased by 0.95 percent. The company's first quarter loss narrowed and the company backed its full year view.

Sporting goods giant Adidas backed its forecast for the year issued last week after reporting higher profit and revenue for the first quarter. The stock closed down by 0.93 percent.

Metro fell by 2.12 percent, after its first-quarter loss widened sharply on investments in its consumer electronics chain Media-Saturn.

HeidelbergCement reported a wider loss for the first quarter. The stock declined by 3.44 percent.

Infineon Technologies fell by 3.14 percent, after its quarterly profit dropped on lower margins.

Fraport dropped by 1.99 percent. Morgan Stanley downgraded its rating on the stock to "Equalweight" from "Overweight."

In Paris, France Telecom advanced by 0.44 percent. The company confirmed its fiscal 2012 forecast of attaining close to 8 billion euros in operating cash flow, despite the pressure on revenues and margins.

Societe Generale fell by 4.24 percent after reporting quarterly results.

Hermes International finished lower by 1.50 percent. The company reported a strong increase in first quarter sales, but warned that weakness in the European economy could slow its 2012 growth.

In London, Smith & Nephew rose by 3.96 percent. The company posted a higher profit for the first quarter and confirmed its full-year forecast of achieving a modest increase in trading profit margin.

Antofagasta dropped by 4.40 percent. The company reported a 12.9 percent sequential decrease in first-quarter copper production.

Randgold lost 3.74 percent. The gold miner posted a surge in its first quarter profit, despite the challenges presented by a coup in Mali.

BG Group declined by 1.83 percent. The company reported higher earnings for the first quarter and announced a memorandum of understanding with Cosan S.A. Indústria e Comércio for the sale of its 60.1 percent holding in Comgás, Brazil's largest gas distribution company, for around $1.8 billion.

Shares of Diageo climbed by 1.54 percent, after the company reported better than expected quarterly results. Diageo attributed its results to growth in emerging markets and a recovery in North America.

Clariant rose by 1.20 percent in Zurich. The company confirmed its outlook for 2012 even as first-quarter profit plunged.

Deutsche Bank upgraded UBS to a "Hold" from "Sell." The stock finished lower by 2.64 percent.

Eurozone's producer prices increased less than forecast by economists in March, data from Eurostat showed Thursday. The producer price index rose 0.5 percent month-on-month in March, slower than 0.6 percent gain in February. Economists had forecast an increase of 0.6 percent.

The UK's service sector growth slowed in April, while posting the weakest expansion in activity since November last year, a survey by Markit Economics showed Thursday. The headline Markit/Chartered Institute of Purchasing & Supply (CIPS) business activity index fell to 53.3 in April from March's 55.3. This was the lowest reading since November last year.

New claims for unemployment in the U.S. fell by more than expected in the final full week of April, according to figures released Thursday by the Labor Department. For the week ended April 28th, initial unemployment claims came in at a seasonally adjusted level of 365,000, a drop of 27,000 from the previous week's revised figure of 392,000.

While the previous week's level of new claims was upwardly revised from the 388,000 initially reported, the drop for the latest week was larger than predicted by most economists, who had expected to see new claims come in at 378,000.

While a report released by the Institute for Supply Management on Thursday showed that activity in the U.S. service sector grew for the 28th consecutive month in April, the pace of growth in the sector unexpectedly slowed compared to the previous month. The ISM said its non-manufacturing index dropped to 53.5 in April from 56.0 in March. The drop surprised economists, who had expected the index to come in unchanged.

U.S worker productivity decreased in the first quarter of 2012, according to figures released by the Labor Department on Thursday, with an increase in output outpaced by an increase in the number of hours worked. Labor Department statistics showed a 2.7 percent increase in output at non-farm businesses coupled with a 3.2 percent increase in hours worked, resulting in a 0.5 percent decline in labor productivity. Most economists had expected a decline in productivity, though the consensus predicted a slightly smaller 0.4 percent drop.

by RTT Staff Writer

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