Thursday, April 9, 2009

European Stocks Edge Higher; Caution Needed

. Thursday, April 9, 2009

By Kimberly Vlach
of Dow Jones News Wire

European stocks have opened modestly higher Thursday, benefitting a positive tone from Asia and the U.S. after the release for better than expected economic data. However, the gains appear fragile given low volumes and high volatility.

At around 0750 GMT, the pan-European DJ Stoxx 600 index was up 0.8% at 185.43. London's FTSE 100 index was 0.9% higher at 3959.30, and Frankfurt's DAX index was 1.3% higher at 4413.52. The CAC-40 index in Paris was up 0.9% at 2947.69.

U.S. stocks rose Wednesday, boosted by the release of wholesale inventories data, which fell by a record increment in February, suggesting that manufacturers and retailers will soon have to stock up on supplies again.

The Dow Jones Industrial Average rose 0.6% to 7837.11 while the broad Standard & Poor's 500 index added 1.2%, closing at 825.16.

And early Thursday in Asia, Japan's Nikkei 225 index closed 3.7% higher, boosted by an unexpectedly positive core machinery orders reading.

Investors also cheered details of Japan's new economic stimulus plan that includes a larger-than-expected $154 billion in spending and tax cuts.

Still, investors should be wary of these gains, as "the recent rally is a mirage, a bear market rally," said Jeremy Batstone-Carr, head of research at Charles Stanley. "It's come too early."

"This is a good market to trade in, but it's bad for the 'buy and hold' investor," he added.

The uptick in forward-looking economic data is relative to the collapse in 4Q, Batstone-Carr said. "'Less bad' does not mean 'good,'" he added. "We're probably back to the levels before the Lehman collapse."

Also making headlines, the German government is offering shareholders of Hypo Real Estate Holding AG EUR1.39 a share for the shares it doesn't already own in the troubled mortgage financier, the government's SoFFin financial markets stabilization fund said. Shares soared 15% to EUR1.38.

Still in the banking sector, Amsterdam's ING Group will divest up to EUR8 billion in non-core assets and trim its geographical spread to refocus its business and boost capital, according to a speech being presented by Chief Executive-designate Jan Hommen. Shares surged 11% to EUR5.82.

Elsewhere, currency markets were fairly quiet ahead of the long Easter weekend, but the euro and dollar rose against the yen in Asia Thursday on the increased risk appetite.

At around 0755 GMT, the euro was at $1.3294 from $1.3245 late in New York, and at Y133.06 from Y131.96. The dollar was back around Y100.10 from Y99.67.

This increased risk appetite has hit the safe haven of the government debt market, and the June bund contract was last seen at 121.89, down 0.40.

Spot gold was slightly higher at $883.65 a troy ounce, up $1.50 versus its New York close, while the May Nymex crude contract was $1.58 cents higher, trading at $50.96 a barrel. Weekly U.S. EIA oil data Wednesday showed the country's crude stockpiles rose less than many analysts had expected.

Bookmark and Share


Post a Comment

Visit to discover Indian blogs