Tuesday, April 14, 2009

European Shares Higher; Banks Lead Advance

. Tuesday, April 14, 2009

By stockOzone team

European shares advanced strongly on Tuesday, as investors returned from a long holiday weekend to push up bank shares after earnings from Goldman Sachs fuelled optimism for first-quarter performance trends in the sector.

The pan-European Dow Jones Stoxx 600 index rose 1.9% to 191.53, with banks the best performers by a long way.

European regional markets were also higher, with the French CAC-40 index up 1.2% at 3,011.16, the U.K. FTSE 100 index up 0.8% at 4,015.19 and the German DAX 30 index up 1.5% at 4,560.21.

U.S. stock futures were mixed, following gains made on Monday.

European-headquartered banks with exposure to investment banking did well on Tuesday, with UBS (UBS) rising 15.6% and BNP Paribas climbing 7.5%.

The gains came after Goldman Sachs Group (GS) said in an early earnings release Monday that both profit and revenue rose in its first quarter and that it has commenced a $5 billion stock offering to help repay funds issued under a government emergency relief program last year.

"Goldman's results confirmed what we already suspected. The first quarter was a good quarter on the back of very strong fixed income trading. First-quarter forecasts need to be increased for the European investment banks," said banking-sector analysts at Merrill Lynch.

Andrew Popper, chief investment officer at SG Hambros said: "What we have seen in recent days is a rally led by the financials. Expectations, which were very low to begin with, have changed somewhat. The catalyst was the release of quarterly results from Wells Fargo and then an extremely strong report from Goldman Sachs."

"However, there are some negatives that still seem to concern the market, such as the state of the economy," he added. "We need to see stronger signs of economic recovery in order to have a more sustained rally," he said.

Philips Electronics ups cost targets.

Shares of Dutch conglomerate Philips Electronics (PHG) recovered from early losses to trade up 8%.

The firm reported a slightly worse than forecast loss during the first quarter as sales dropped 17% but lifted its target for annual cost savings to 500 million euros ($668 million) from 400 million euros.

"We still believe that earnings will gradually improve going forward, as Philips started early in addressing its cost base," noted analysts at Sal Oppenheim.

Mineral extractors were strong, especially copper miners, with Vedanta Resources up 12.7%, Xstrata shares up 7.3% and Antofagasta shares up 5.2%.

Copper jumped to its highest level in more than five months in New York on Monday, receiving a lift from upbeat economic data from China, where the government reported growth in industrial output of 8.3% for March.

The more defensive-type companies in the equity market, such as telecoms and drugmakers, were broadly lower on Tuesday.

Shares of wireless telecom giant Vodafone Group (VOD) fell 1.6% and France Telecom shares dropped 1.4%

BT Group (BT) shares were flat following reports that it plans to take a 1.5 billion pound ($2.2 billion) write-down, slash its dividend and cut another 10,000 jobs.

Pharmaceutical-sector firms under pressure included Roche Holding (RHHBY), down 1.3% and Sanofi-Aventis (SNY), down 2.5%.

Disclosure: Author does not own any of the stocks discussed here.

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