Markets rally after fall in early trading

THE WEEKEND’S European elections unsurprisingly dominated market sentiment yesterday.

With the Dublin and London markets closed, all eyes were on the main European bourses and the US. Having sustained falls in early trading, equity markets rallied. The euro also regained ground having fallen to three-month lows earlier in the session. The price of oil also fell in anticipation of lower demand from Europe as doubts about the euro zone economic recovery increased.

EUROPE

EUROPEAN STOCKS advanced as German Chancellor Angela Merkel said she will receive French president- elect François Hollande with “open arms” as the two nations work together to tackle the debt crisis.

The Stoxx Europe 600 Index rose 0.8 per cent to 254.91 by the close in London, erasing an earlier decline of as much as 0.8 per cent.

National benchmark indexes rose in 10 of the 16 western European markets open today. Spains IBEX 35 jumped 2.7 per cent and Italys FTSE MIB rallied 2.6 per cent. Germanys DAX rose 0.2 per cent while Frances CAC 40 increased 1.7 per cent.

However, the Greek stock market was badly affected, with Greece’s ASE plunging 6.7 per cent.

Banking stocks had been among the main fallers earlier in the session, though they regained ground throughout the day.

BNP Paribas and Societe Generale, the biggest French lenders, gained 4.3 per cent to €30.25 and 4.4 per cent to €18.06 respectively, erasing earlier losses. The spread between German 10-year government bond yields and French yields on similar-maturity debt narrowed.

UniCredit and Intesa Sanpaolo rose 3.8 per cent to €2.80 and 2.5 per cent to €1.08 respectively, as UBS kept its positive view of the lenders among Italian banks. Banco Santander, Spains biggest lender, rallied 4.3 per cent to €4.88.

National Bank of Greece plummeted 8.3 per cent to €1.55 while Alpha Bank SA dropped 19 per cent to €0.84.

Public Power, Greece’s biggest electricity company, retreated 14 per cent to €2.14.

Citigroup economists said the risk of Greece leaving the euro has risen to as much as 75 per cent from 50 per cent before the election.

CSM, the worlds biggest maker of bakery ingredients, jumped 19 per cent to €12.98, the biggest gain since at least 1989, as the company said it will sell US and European bakery-supply units to fund the Purac and Caravan bio-based ingredients brands growth.

US

STOCKS IN the US swung between gains and losses following the European election results, and on the back of the biggest weekly decline in 2012, as investors weighed François Hollande’s election as France’s president and Greek voters flocking to anti-bailout parties.

American International Group fell 5.6 per cent during the day as the US Treasury Department sold $5 billion of shares. Banks in the Standard and Poors 500 Index gained as Warren Buffett said the nations lenders have “liquidity coming out of their ears” and are in better shape than European rivals.

Walt Disney rose 1.2 per cent as the movie Marvels The Avengers earned a record $200.3 million in its opening weekend. The SP 500 slipped less than 0.1 per cent to 1,368.60 by mid-morning.

The benchmark measure for US equities fell 2.4 per cent last week. The Dow Jones Industrial Average decreased 28.65 points, or 0.2 percent, to 13,009.62.

The S&P 500 dropped the most since December last week as a report showed US employers added fewer jobs than forecast and Spain entered a recession. The gauge is still up 8.5 per cent in 2012 on better-than-estimated earnings. About 70 per cent of SP 500 companies that reported results since the start of the earnings season have topped projections.

Meanwhile, oil fell to the lowest level this year as European elections stoked speculation that austerity efforts will be derailed and escalate the debt crisis. Prices fell as much as 3.2 per cent following the election results.

Crude oil for June delivery slid $1.90, or 1.9 per cent, to $96.59 a barrel by mid-morning on the New York Mercantile Exchange. The price had dropped to $95.34, the lowest intraday level since December 20th.

The euro fell as much as 1 percent against the dollar to the lowest level since January, which also weighed on the price of oil.

US oil inventories climbed 2.84 million barrels to 375.9 million in the week ended April 27th, the most since September 1990, according to the Energy Department. Domestic output increased 8,000 barrels a day to 6.12 million, the highest level since November 1999. However, total consumption fell for a third week, dropping 1.1 per cent to 18.5 million barrels a day.

“Production continues to rise but demand is still relatively weak,” said Phil Flynn, an analyst at PFGBest in Chicago. “Fundamentals dont look good and well see lower prices.” – (Bloomberg)