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Good Morning.
Europe
Most European indices ended yesterday’s trading session positively. The Euro Stoxx 50 added 0.15%, closing at 3211.78 while the German Dax and the Spanish Ibex 35 added 0.54% and 0.19%, to close at 9754.43 and 10587.20 respectively. The FTSE 100 rose 0.31% to close at 6873.08. Yet again, the positive corporate earnings being published in general appear to be the source for the positive stock trading and valuation. Draghi’s comments late last week also appear to have lasting effects on the stock market, fuelling further increases. It emerges that the German Bundesbank will welcome measures from the ECB which would increase stimulus to European markets. This also appears to have had its positive on trading within the FTSE index. Furthermore, there have been additional indications that European policy makers are not satisfied with the inflation outlook for the European bloc.
Draghi’s words, together with the increased expectation of additional stimulus, have put downward pressure on the Euro. The currency fell to a five-week low versus the Greenback currency. This also comes on the back of a slide in the German ZEW Index from 43.2 in April to 33.1 in May. This index aims to predict Germany’s economic developments six months in advance.
The Euro currency traded close to a five-week low indicating that the market is expecting sustained economic weakness in the European region which and this will be the reason for further measures to increase growth and spike inflation.
The readings of a number of economic indicators are showing that the European economy may be slowing. The German inflation index for last month is expected to fall by 0.3% whilst revised factory output for the entire economic area is expected to show a drop of 0.3% in March from the previous month.
Spain
The Spanish government managed to raise 5 billion Euros in its first sale of bonds tied to inflation. The aggregate demand by investors totalled 20.3 billion, four times the amount sold; an indication of the increased demand strength for peripheral paper. 73% of the sale was bought by non-resident investors, again a sign of increased confidence in the country’s sovereign paper. Sovereign yields on Spanish paper have continued to fall since their highs in peak of the European crisis.
UK
The BoE rates decision is expected today. There has been talk that a rate hike is expected to be announced later on today. This expectation drove increases in the UK currency yesterday.
US
One of the main highlights from yesterday’s trading session is the fact that the S&P 500 Index surpassed the 1900 level for the first time. This came after the revised retail sales for March were higher than what was initially reported. The index closed the trading session by adding 0.04% to its previous close, to end at 1897.45. This second close on a high was supported by internet and small-cap rallies. The Dow Jones also closed in positive territory by adding 0.12%. The Nasdaq however, shed 0.33%, to close the day at 4130.16.
Meanwhile, retail sales for April were rather disappointing after the improved figure for March. April’s reading was up by just 0.1% when the expectation was that of 0.4%.
Asian Markets
Asian stock indices were mixed overnight with the Hang Seng Index adding 0.88% to reach 22549.44 and the Nikkei 225 was slightly lower, dropping 0.21% to 14395.82. The Korean Kospi registered the largest gain in percentage terms. It rose 0.90% to close at the 2000.73 level.
Company News
Facebook said it may consider opening a sales office in China to provide more support to local advertisers who make use of the social network to reach foreign customers. When asked on the matter however, the company’s vice president of corporate development, Vaughan Smith, decided not to comment on how soon it plans to do this. Smith said that the company was exploring ways to provide additional support locally.
France’s second largest bank, Societe Generale, said it has set out plans to increase profitability and boost its dividend over the next three years. It also said that Russia will contribute to its growth. The bank is targeting a return on equity of more than 10% by 2016. According to the bank, the dividend payout will rise to 50% of profit for the next two years.
Airbus stock increased by 6.2% yesterday, reaching 52.54 Euros per share. This came as the company’s earnings beat estimates significantly.
ThyssenKrupp also gained 4.1%, closing at 22.14 Euros. The company said that its 2014 profit excluding one-time items will almost be double that of last year. This will beat the forecast of circa 1 billion Euros.
EasyJet stock shed 4.2% yesterday to close at 1658 pence. This was its biggest decline since February. The company reported a pretax loss of 53 million Pounds for the six month period ending March 31. It also expects to post low single-digit percentage growth in the second half of its financial year.
Have a Great Day
Karl
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