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Oct 16, 2012
European Markets at Close Report | MarketWatch -October 16, 2012-: Spain bailout chatter lifts European stocks
By Sara Sjolin, MarketWatch
LONDON (MarketWatch) — Spain led European stocks to higher ground Tuesday, with banks pacing gains after reports suggested the country is one step closer to making a formal bailout request and may get Germany’s support.
The Stoxx Europe 600 index XX:SXXP +1.32% jumped 1.3% to close at 274.38, its best daily performance since Oct. 1.
“It’s all related to the bailout,” said Predrag Dukic, senior equity sales trader at CM Capital Markets in Madrid.
“People believe the Spanish bailout is closer now after Germany indicated they were open for a precautionary line of credit and that is helping push stocks higher today.”
The positive news flow about Spain’s potential bailout boosted risk-sensitive sectors such as banks and resource firms. BBVA SA ES:BBVA +5.98% BBVA +7.25% jumped 6%, Banca Popolare dell’Emilia Romagna Scarl IT:BPE +7.83% rose 7.8% and Lloyds Banking Group PLC UK:LLOY +6.05% LYG +5.75% advanced 6.1%.
Spain occupied investors’ minds after media reports said late Monday that Madrid is ready to formally request financial aid but that officials are delaying an announcement because of concerns about the effect on other euro-zone countries. A formal bailout request is necessary for Spain to allow the European Central Bank to buy its sovereign debt.
The reports said that Spain is considering requesting a direct line of credit, rather than seeking immediate aid from the European Stability Mechanism rescue fund. See: Spain outlines path to bailout request: report
Germany is open to granting Spain a precautionary credit line to the rescue fund, Bloomberg reported, citing senior coalition lawmakers. See: Germany open to precautionary Spanish credit line
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In Madrid, the IBEX 35 index XX:IBEX +3.41% rallied 3.4% to 7,940.20, the biggest jump since early September.
“A move like today suggests that we are pricing in a bailout, and the more we rally now” the less room there will be for gains after a decision is made, Dukic said.
“But I do certainly believe that if we get a bailout or precautionary credit line the market will move higher.”
Banks posted some of the biggest gains in Spain, shrugging off a recent round of ratings downgrades by Standard & Poor’s Ratings Services. The credit rating agency cut 15 of the country’s banks following a sovereign credit downgrade earlier this month.
Banco Santander SA ES:SAN +4.32% SAN +3.53% rose 4.3%, Bankinter SA ES:BKT +7.36% jumped 7.4% and Banco de Sabadell SA ES:SAB +4.21% gained 4.2%.
U.S. earnings were also in focus, with Goldman Sachs Group Inc. GS +0.36% swinging to third-quarter profit and boosting quarterly dividends to 50 cents a share from 46 cents. See: Goldman Sachs swings to profit, boosts dividend
“U.S. earnings are very encouraging and supportive to global markets. We’ve seen the [International Monetary Fund] and other world economic institutions suggesting that we are in a recession and then these companies come out with positive results. It gives us hope that not all is lost in the global economy,” CM Capital Markets’s Dukic said.
U.S. stocks were also higher on Wall Street. See: U.S. stocks rise on earnings, Spain news
Data out of Germany, the largest European economy, also attracted investors’ attention. The ZEW expectations index rose to minus 11.5 points in October from a reading of minus 18.2 in September, beating analysts’ estimates. See: German ZEW investor expectations gauge rises
Banks also traded higher in Frankfurt, where Deutsche Bank AG DE:DBK +4.16% DB +4.39% rose 5.1% and Commerzbank AG DE:CBK +3.79% gained 4.1%.
The DAX 30 index DX:DAX +1.58% closed 1.6% higher at 7,376.27.
And in Paris, shares of Credit Agricole SA FR:ACA +5.28% gained 5.3%, BNP Paribas SA FR:BNP +4.33% added 4.3% and Société Générale SA FR:GLE +3.86% rose 3.9%.
Oil group Total SA FR:FP +2.73% TOT +2.81% also moved higher, up 2.7%, as oil prices wobbled. See: Crude-oil futures struggle for direction
The CAC 40 index FR:PX1 +2.36% increased 2.4% to 3,500.94.
Among U.K. energy shares, Royal Dutch Shell PLC UK:RDSB +1.07% RDS.B +1.13% rose 1.1% as BP PLC UK:BP +1.35% BP +1.67% added 1.4%.
Miners were also on the rise, as most metals prices moved higher. Kazakhmys PLC UK:KAZ +2.75% put on 2.8% and BHP Billiton PLC UK:BLT +1.17% BHP +1.13% AU:BHP -0.84% rose 1.2%. See: Gold futures push higher, aided by dollar losses
Rio Tinto PLC UK:RIO +2.94% RIO +2.29% AU:RIO -1.25% climbed 2.9%, as the company said that its global mine output rose 5% in the third quarter and that it’s on track to produce 250 million metric tons of iron ore this year. See: Rio Tinto maintains 2012 iron ore guidance.
Bucking the positive trend in London, shares of GKN PLC UK:GKN -3.35% lost 3.4%, after the engineering group reported adjusted third-quarter pretax results slightly lower than in 2011. See: GKN: Softness in European auto, industrial markets.
The FTSE 100 index UK:UKX +1.12% picked up 1.1% to 5,870.54, with HSBC Holdings PLC UK:HSBA +1.78% HBC +1.73% HK:5 +1.21% up 1.8%.
Outside the main indexes, Finnish tire maker Nokian Renkaat Oyj FI:NRE1V -11.85% tumbled 12% as it warned operating profit in second half of the year will be weaker than last year.
Sara Sjolin is a MarketWatch reporter, based in London.
|ADVFN III||World Daily Markets Bulletin|
Tuesday, 16 October 2012
|ADVFN III||Evening Euro Markets Bulletin|
Tuesday, 16 October 2012
|London Market Report|
| London close: US earnings spark surge in UK stocks|
- US earnings lift sentimentFTSE 100: Financials & miners jump on increased risk appetite
- Spain nearing a bailout request
- German ZEW index beats forecasts
Better-than-expected earnings from Goldman and Johnson & Johnson and signs of progress in the Eurozone saw the FTSE 100 surge 1.2 per cent on Tuesday afternoon.
"Global markets roared with optimism today as investors adopted a risk-on attitude thanks to strong US corporate results," said financial trade Shavaz Dhalla from Spreadex. According to Thomson Reuters Starmine data, over two-thirds of US companies that have reported earnings so far have either met or beaten expectations.
Dhalla said: "Thus, in the context of tightening regulations, banking scandals and countries nearing the end of their financial tether, investors can at least take comfort in the fact that many US companies are still managing to ride the current slowdown in global growth surprisingly well."
Bonds in Spain advanced today after the Treasury saw solid demand at a short-term bond auction this morning admits expectations that the country is ready to request a bailout. The Treasury raised €4.86bn, topping the high-end of its €3.5-4.5bn target. Demand totalled €13.654bn overall, while yields edged lower.
The German ZEW survey which measures economic sentiment improved to -11.5 in October, from -18.2 the month before and better than the -14.9 estimate.
UK CPI inflation fell from 2.5% to 2.2% in September, in line with market expectations, taking the rate to its lowest level since November 2009 and close to the 2% target set by the Bank of England. Bank of America Merrill Lynch strategist John Wraith told Reuters: "Inflation numbers were in line with expectations, which on one level doesn't mean very much but on another level probably hardened more expectations of more QE being announced in November."
Financial and resource stocks were performing well on Tuesday afternoon as investors adopted a 'risk-on' attitude on the back of improved newsflow from the Eurozone and better-than-expected corporate results in the US. Lloyds, Admiral, Royal Bank of Scotland and Barclays were leading financials higher, while mining peers Evraz, Polymetal and Kazakhmys were also in demand.
Diversified mining group Rio Tinto rose after hailing a strong set of production results in the third quarter, while Anglo American gained after saying that the illegal occupation of its Sishen Mine has been brought to an end by police.
Heading the other way was global engineering firm GKN after warning that macroeconomic conditions have deteriorated in recent weeks and it was seeing evidence of softening in order books. Investec this morning cut its price target on the stock and retained a 'hold' rating.
Telecoms titan BT Group was higher after Nomura reiterated its 'buy' rating on the stock, saying it prefers it to Vodafone on "structural growth drivers and dividend outlook". Meanwhile, airline group IAG was a heavy faller after Liberum Capital downgraded its recommendation for the shares to 'sell'.
FTSE 250: N Brown jumps after first-half beat
Internet and catalogue home shopping firm N Brown topped the risers list on Tuesday afternoon, gaining 12% after beating forecasts in the first half. The company reported that revenue in the 26 weeks to September 1st came in at £379.3m, up 4.3% on the year and ahead of the consensus estimate of £371.7m.
Chip group Imagination Technologies was also a high riser after both Liberum Capital and Numis upgraded their ratings on the stock.
Oil group Ophir Energy was the worst performer of the day after Deutsche Bank downgraded the stock to 'sell' and cut its price target from 565p to 505p.
High Street betting firm William Hill gained after agreeing on a revised and increased possible offer with GVC for Sportingbet.
Thermal processing services provider Bodycote was in demand after buying US-based Carolina Commercial Heat Treating from Bluewater Thermal Solutions for $68m. The company also said it was trading line with expectations in the most recent quarter.
UK housebuilder Bellway was also a high riser after delivering a solid increase in full-year pre-tax profit, helped by a strong performance in London, and said reservations since July 31st have remained in line with expectations.
FTSE 100 - Risers
Evraz (EVR) 243.70p +6.33%
Lloyds Banking Group (LLOY) 42.76p +6.05%
Admiral Group (ADM) 1,175.00p +5.00%
Royal Bank of Scotland Group (RBS) 280.00p +4.44%
Barclays (BARC) 246.10p +3.91%
Shire Plc (SHP) 1,856.00p +3.46%
ARM Holdings (ARM) 596.00p +3.20%
Polymetal International (POLY) 1,160.00p +3.02%
Weir Group (WEIR) 1,771.00p +2.97%
Rio Tinto (RIO) 3,061.00p +2.94%
FTSE 100 - Fallers
GKN (GKN) 204.80p -3.35%
International Consolidated Airlines Group SA (CDI) (IAG) 155.60p -1.52%
Capita (CPI) 733.00p -0.81%
InterContinental Hotels Group (IHG) 1,593.00p -0.69%
Tesco (TSCO) 307.90p -0.68%
Pennon Group (PNN) 717.00p -0.62%
Sainsbury (J) (SBRY) 356.40p -0.39%
WPP (WPP) 854.50p -0.18%
Vodafone Group (VOD) 173.00p -0.17%
Meggitt (MGGT) 402.00p -0.12%
FTSE 250 - Risers
Brown (N.) Group (BWNG) 306.90p +13.79%
Imagination Technologies Group (IMG) 478.90p +7.86%
Perform Group (PER) 430.00p +7.50%
Kenmare Resources (KMR) 40.10p +6.56%
Paragon Group Of Companies (PAG) 237.10p +6.32%
Persimmon (PSN) 786.00p +5.29%
William Hill (WMH) 342.00p +4.91%
Berkeley Group Holdings (The) (BKG) 1,491.00p +4.41%
Bodycote (BOY) 359.40p +4.14%
Cranswick (CWK) 765.50p +3.45%
FTSE 250 - Fallers
Ophir Energy (OPHR) 579.50p -3.34%
Diploma (DPLM) 447.30p -1.65%
ITE Group (ITE) 198.90p -1.63%
Stobart Group Ltd. (STOB) 116.80p -1.52%
Talvivaara Mining Company (TALV) 133.80p -1.18%
Invensys (ISYS) 224.00p -1.02%
Greggs (GRG) 486.10p -0.96%
Carpetright (CPR) 693.00p -0.93%
Dignity (DTY) 927.50p -0.91%
TalkTalk Telecom Group (TALK) 178.40p -0.89%
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