European markets gain on US data

Friday, June 19, 2009

LONDON (updated on: June 18, 2009, 22:17 PST): European stock markets edged higher Thursday after a key US indicator suggested that recovery in the world's leading economy could be taking hold. The London FTSE 100 index added 0.06 percent to close at 4,280.86 points while in Paris the CAC 40 rose 1.04 percent to 3,194.06. The Frankfurt Dax gained 0.78 percent to end the day at 4,837.48. Elsewhere there were gains of 0.82 percent in Brussels, 1.11 percent in Milan, 1.41 percent on the Swiss Market Index and 1.09 percent in Madrid. In mid-day trading on Wall Street the Dow Jones Industrial Average was up 0.81 percent at 8,565.88 while the tech-heavy Nasdaq was moving in the opposite direction and was down 0.27 percent at 1,803.11. The stronger trends reflected investor response to the US Conference Board's index of leading indicators, a measure of economic conditions in the coming months. The board said its May reading rose 1.2 percent from the prior month, eclipsing market expectations for a gain of 1.0 percent. The Conference Board noted that its index had increased in April for the first time in seven months, by a revised 1.1 percent. The index, which had been on a downward trend since hitting a peak in July 2007, "has risen sharply in the past two months amid widespread strengths among its components," the board said. "With these large and extensive increases, the six-month change in the index has become positive for the first time in two years," since April 2007. US authorities expect the world's largest economy to resume modest growth in the second half of the year after sliding into recession in December 2007. The Federal Reserve forecasts the US economy will contract between 1.3 to 2.0 percent in 2009 and post modest 2.0 to 3.0 percent growth in 2010. In other news deemed positive for market sentiment, the US Labor Department reported that initial claims for unemployment insurance benefits rose to 608,000 in the week that ended June 13, surpassing analysts' forecasts of 604,000 new claims. But the report nonetheless showed a surprise decline in the number of continuing jobless claims from the prior week's all-time high. "This is still a disconcertingly high level of continuing claims, but in terms of this series it qualifies as relatively good news today since it marks the first decline in continuing claims since the week of January 3," said Patrick O'Hare of Briefing.com. "It is clear now that the pace of layoffs has slowed. It is also quite clear that the labor market can still be considered weak despite that consideration." In Paris leisure group Club Mediterranee gained 6.93 percent on news that financier Bernard Tapie had bought a stake of just over 1.0 percent. European aerospace giant EADS added 1.38 percent after Hungarian low cost airline Wizz Air signed a draft agreement to buy 50 medium-haul planes from EADS aircraft unit Airbus. The order would have a catalogue price of 3.8 billion dollars. Tyremaker Michelin moved in the opposite direction, shedding 1.73 percent. Company head Michel Rollier warned that the tyre market was unlikely to pick up before the middle of next year. In Frankfurt energy group EON rose 2.31 percent, Deutsche Telekom 2.89 percent and Deutsche Bank 3.45 percent on upbeat assessments of global economic prospects. But BASF, the world's leading chemicals group, fell 1.02 percent. Company boss Jurgen Hambrecht insisted there was still no reason to assume that the worst of the global economic crisis had passed. Earlier Thursday in Asia, Tokyo closed down 1.39 percent as exporters were hit by a stronger yen, dealers said. (AFP)