Major markets across Europe are set to move into positive territory Thursday morning, taking cues from upbeat sentiment in Asia and a rebound in oil prices. Corporate results will guide trading sentiment for the day with little economic news due for the day from Europe. Traders are also likely to digest a slew of economic reports from the US for signals on developments in the world’s largest economy.
European markets fell on Wednesday after stronger than expected US economic data, triggered concern that the U.S. Federal Reserve will delay interest rate. Energy and mining stocks slipped on falling crude oil and copper prices, putting further pressure on the markets. The U.K.’s FTSE 100 index fell 0.18% to 6,204.50, while France’s CAC 40 index slipped 0.53% to 5,561.78. Germany’s DAX index declined 0.23% to 6,701.70.
On Wall Street, markets saw some weakness during trading on Wednesday as troubling inflation data generated some negative sentiment. The NASDAQ underperformed the other major averages by a wide margin, although they all ended the session in negative territory. The Dow Jones Industrial Average closed down 5.44 at 12,577.15, while the NASDAQ closed down 18.36 at 2,479.42 and the S&P 500 closed down 1.28 at 1,430.62.
The weakness in the US markets came after the Labor Department released a report showing that its producer price index rose 09% in December following an unrevised 2.0% increase in November. Economists had been expecting a more modest increase of about 0.5%.
The increase by the index was due in large part to growth in food and energy prices, but the core producer price index still rose 0.2%, above economist estimates of a 0.1%. While the data raised some concerns about the pace of inflation, some traders refrained from drawing any conclusions ahead of the release of the Labor Department’s report on consumer prices on Thursday.
In the after hours trading, PC maker Apple reported first quarter results revealing a 78% surge in profit. The company posted 24% revenue growth, driven by strong holiday sales of Macintosh computers and iPod music players. Apple’s quarterly earnings and revenue breezed past Wall Street as well as its own expectations. However, the company forecast second quarter earnings and revenue below analysts’ current consensus estimates.
In commodities space, crude for February delivery closed up $1.03 at $52.24 a barrel after hitting a low of $50.28 a barrel. Oil prices extended gains in Asian trading on Thursday and lingered above $52 a barrel.
In Asia-Pacific, all markets, except Shanghai, were in positive territory during the day’s session. Tokyo benchmark Nikkei closed up 109.58 points at 17,370.93 as the central bank left its key interest rate unchanged at 0.25% with a split vote of 6-3.
A slew of corporate results hit the wires early Thursday to steer trading action. Swiss drug major Novartis AG reported that fourth quarter net income climbed 23% to $1.66 billion from $1.35 billion last year. Net sales for the quarter rose 16% to $10.05 billion from $8.66 billion a year ago. Looking ahead, Novartis sees group net sales are rising in 2007 at a mid- to high-single-digit rate in local currencies and net sales in the Pharmaceuticals Division at a mid-single-digit rate for the year. Novartis also announced European Commission’s approval for Exforge as a new and highly effective single-pill treatment for patients with high blood pressure.
Elsewhere, German pharmaceutical giant Merck KGaA posted an 18% rise in fourth quarter profit. Quarterly sales rose 9% to EUR 1.63 billion. Full year revenues from Liquid Crystals were up 21%, while Ethicals sales increase 11% led by oncology drug Erbitux.
French cognac and spirits major Remy Cointreau revealed organic growth of 5.6% for the Group’s own brands and 2.2% in overall organic growth for the nine months to December. On Wednesday, the stock gained on rumors that drinks and spirits giant Diageo plc’s distribution joint venture with Moet is on the verge on termination. The development, if true, is expected to result in Diageo bidding for Remy Cointreau.
Still in France, train maker Alstom posted revenue growth of 15% for the third quarter. The company expects annual sales to grow by 10% in fiscal year 2006-07 from the previous year
British retailer Kesa Electricals reported that total Group revenue increased 8.1% in local currency and 6.4% on like-for-like basis during the Christmas trading period. Sales were helped by the strong demand for new technologies, particularly flat screen televisions and multi media, and the continued return to positive growth for white goods.
Belgian supermarkets chain Delhaize Group posted fourth quarter same store sales growth of 2.2% in the U.S. and 2.7% in Belgium. The company reported fourth quarter sales growth of 4.6%.
A report in Le Figaro said European insurance major Allianz SE is buying the 42% stake in Assurances Generales de France SA, which it doesn’t already own, for about EUR10 billion euros or US$13 billion. The report did not mention any sources.
In the UK, the Board of London Stock Exchange Group plc, on Thursday issued its second shareholder circular in response to the offer posted by Nasdaq on 12 December 2006. The LSE urged shareholders to reject the Nasdaq’s offer which it deemed “wholly inadequate”.
The major economic reports due on Thursday are November Retail sales data for November and ZEW survey for Switzerland. Fruther, the ECB is slated to release its Monthly Report.
In the US, economic data is likely to remain in focus on Thursday, with the Labor Department due to release its report on consumer prices in the month of December. Economists expect prices to increase by 0.4 percent, while core prices are expected to edge up 0.2 percent. Traders will also be presented with data on housing starts, weekly jobless claims, leading economic indicators, and business activity in the mid-Atlantic region.
Additionally, trading may also be impacted by traders’ reaction to stellar quarterly results from Apple. Merrill Lynch, Harley-Davidson, Bank of New York and UnitedHealth are among the companies that will release their results before the start of trading on Thursday, while IBM is among those that will report after the close.
