Europe Stocks End Flat as Spain Impact Fades
LONDON – European stocks ended flat across the board Friday as the positive impact faded after an upgrade of Spain’s credit outlook and slightly positive European data.
The pan-European Stoxx Europe 600 index ended flat, as did the London’s FTSE 100. Germany’s DAX rose 0.2%.
European markets failed to take traction from another positive session in the U.S., where the Dow Jones Industrial Average rose 0.3%. On Wednesday, the Dow rose to its fifth-straight record close, and the 44th of the year. The S&P 500 index also 0.3%.
Closely watched consumer price data showed euro-zone inflation rebounded to 0.9% in November from 0.7% in October, in line with market expectations but still well below the European Central Bank’s target. Investors have been sensitive to inflation data after October’s anemic reading raised the specter of deflation, and prompted the ECB to cut interest rates earlier this month.
The pickup in inflation, along with a surprise fall in the euro-zone jobless rate, “provides grounds for a certain amount of relief,” and takes the pressure off the ECB to introduce further easing measures at next week’s meeting, said Jeremy Batstone-Carr, chief economist and strategist at London-based brokerage and wealth manager Charles Stanley, which has around £18 billion ($29.42 billion) in assets under management.
But corporate earnings need to improve before investors will drive the rally in European stocks much further, he said.
“This strong run we’ve seen has taken markets out of fair value territory to fully valued or even expensive,” said Mr. Batstone-Carr.
Unemployment in the euro zone ticked lower in October, at 12.1% from 12.2% in September, which was a record high. Improvements in employment figures took place mainly in France, Germany and Austria.
Earlier, S&P held Spain’s credit rating at BBB-, but said the potential for export-led growth has improved the country’s prospects.
“The rebalancing of the Spanish economy is definitely gathering pace, but we think the process is going to be long,” said analysts at Citigroup.
The Netherlands, by contrast, was cut to AA+ due to a weaker outlook for economic growth, S&P said. Reaction in bond markets was muted, with Dutch bonds steady and Spanish bond yields modestly lower. Yields fall as prices rise.
Spain’s IBEX 35 was the standout performer in the morning, climbing 0.4% after the rating move. The move eventually reversed, with the IBEX index losing 0.2% on the day.
Dutch stocks and bonds largely shrugged off the loss of the Netherlands’ triple-A credit rating, also at the hands of S&P. The Netherlands’ AEX index lost 0.2% on the day.
The major currency markets were little moved Friday, with, the euro staying roughly flat against the dollar at $1.3609, and the dollar also flat against the yen at ¥102.43
Sterling continued its strong run, being also mostly flat on the day toward its highest levels against the dollar since August 2011, at $1.6384.
In corporate news, shares in TeliaSonera fell after the Swedish telecommunications company said four senior employees, including the company’s chief financial officer, will leave the company as a result of a continuing review of its business in Eurasia.
Crédit Agricole climbed after analysts at UBS upgraded their view on the French banking sector, and suggested the bank as one of its key buy recommendations.
– WALL STREET JOURNAL