Europe off highs

Thu, 08 May 2008

Europe's main stock markets closed firmer but off their highs on Wednesday as investors digested the latest US economic data in the hope it would confirm a more optimistic view on the outlook.

Dealers said the markets were higher following solid gains on Wall Street overnight but a more tentative opening in New York made for more subdued trade and some profit-taking trimmed the advance.

Another spike in oil to fresh record highs — despite US stockpile figures which should have eased some of the concerns over supply — added to concerns over the likely inflation impact of prices now expected by some to hit 150 or even 200 dollars.

Dealers said a weaker euro helped some of the exporters while both the European Central Bank and the Bank of England were expected to leave interest rates on hold at their meetings on Thursday.

In London, the FTSE 100 index was up 0.74 percent at 6261.00 points. In Paris, the Cac 40 rose 0.68 percent to 5075.31 points and in Frankfurt the Dax put on 0.84 percent at 7076.25 points.

The Euro Stoxx 50 index of leading eurozone shares was up 0.69 percent.

The euro was at 1.5375 dollars.

In Asian trade, Japanese stocks rose 0.38 percent to their highest level in almost four months but Hong Kong slumped 2.48 percent after heavy losses in the mainland Chinese markets.

On Wall Street, shares were lower as investors turned cautious on the oil price lead and digested news that telecoms giant Sprint Nextel and Clearwire were joining forces on emerging WiMax wireless Internet technology.

The Dow Jones Industrial Average was down 0.48 percent at around 4.15pm GMT.

"Inflation fears are highlighting early activity as Federal Reserve Bank of Kansas City President Thomas Hoenig said that rising inflationary pressures are 'troublesome' and a 'serious' matter, and now stand at 'unacceptably high levels,'" analysts at Schaeffers Research wrote in a briefing note.

Some economists fear that rocketing oil prices could crimp US economic growth which has been threatened by a long-running housing market slump and a related credit squeeze.

At the same time, first quarter data on labour productivity showed a marked gain, offering some reassurance that prices can be kept in check.

In London, the feature of the day was a gain of 29.2 percent to 510 percent for Enterprise Inns after it said it could change into a property investment company.

British American Tobacco rose 2.89 percent to 1,994 pence after reporting a 21 percent gain in first quarter earnings.

Low cost carrier easyJet was up 3.11 percent to 306.75 pence despite a tripling of losses in its first quarter as investors looked instead at positive outlook guidance from the company.

In Paris, dealers said sentiment got a boost after strong results from Lafarge eased concerns over earnings despite the uncertainties created by the US subprime home loan crisis.

At the same time, gains in the dollar against the euro offered some breathing space for the exporters, with dealers suggesting further US interest rate cuts are now unlikely.

Cement maker Lafarge jumped 5.06 percent to 120.50 euros after reporting a 49 percent increase in first quarter earnings while advertiser JCDecaux gained 7.24 percent to 20 euros after it increased its full-year forecasts.

In Frankfurt, solid results — outside the banking sector — kept the tone positive, dealers said.

"The analysts are simply ignoring the bad news," said Mirko Phillep of Helaba bank, citing Commerzbank which rose despite more problems due to the US sub-prime crisis.

Germany's second largest bank rose 1.63 percent to 23.67 euros despite reporting a 54 percent slump in first quarter net profit.

Dealers said the fact that Commerzbank's results were as expected and contained no fresh bad news helped.

Elsewhere in Europe, the Bel-20 in Belgium was up 0.42 percent, Madrid's Ibex-35 added 0.15 percent, Italy's Mib-30 put on 0.82 percent, the AEX in Amsterdam rose 0.97 percent and the Swiss Market Index gained 1.27 percent.