--European stocks higher, retracing losses from Thursday
--ECB disappointment palpable, but focus now on US nonfarm payrolls
--Euro up against dollar, though likely to tread water ahead of U.S. data
--Euro-zone PMI services ahead of expectations
By Andrea Tryphonides
European financial markets retraced losses from the previous session
after the disappointment with the European Central Bank's inaction
Thursday. Attention turned to the closely watched U.S. nonfarm
payrolls report, which is seen as a key indicator of the health of the
world's largest economy.
At 0810 GMT, the benchmark Stoxx 600 index was up 0.9% at 261.66.
Germany's DAX was up 1.4% at 6700.99; France's CAC 40 had increased
1.6% to 3285.26; and the U.K.'s FTSE 100 was up 0.7% at 5707.79.
Equities moved higher after the euro-zone services purchasing mangers
index was better than expected in July, with Spain of particular
interest. Spanish services PMI gained a touch to 43.7 from 43.4 in
June, ahead of expectations for a fall to 42.9.
"The slight uptick is relatively good news for the Spanish economy
that is suffering from another deep contraction in activity," said
Annalisa Piazza at Newedge. "However, we would not read too much out
of today's data as domestic demand is still expected to suffer in the
coming quarters."
The final reading for the services PMI of the euro zone as a whole
came in at 47.9, slightly ahead of the initial estimate of 47.6.
Interestingly, France's reading was revised down a touch to 50, from
50.2 and the German index up to 50.3 from 49.7.
Spain's IBEX 35 gained 1.9% to 6492.50, having fallen by up to 5% in
the previous session. But Spain's 10-year government bond yield
remained elevated, up 12 basis points at 7.18% according to Tradeweb.
Spanish 10-year bond yields rose back above the 7% mark on Thursday
amid the broad selloff in European assets. Investors had hoped for a
big policy move from the central bank on Thursday after ECB President
Mario Draghi said last week the bank would do whatever it takes to
safeguard the future of the euro.
Mr. Draghi pledged Thursday to draw up a set of unconventional
measures to preserve the euro, but his comments disappointed investors
looking for more concrete plans. The central bank left key interest
rates unchanged, as expected.
The focus has now shifted to U.S. nonfarm payrolls.
"With the Federal Reserve's and ECB's August meetings now behind us,
attention now turns to today's U.S. payrolls report for July," said
Jeremy Lawson, an economist at BNP Paribas. "Another sub-100,000
increase, as we expect, and sentiment will probably take another
battering, though it would probably more or less be a lock-in for the
unveiling of QE3 [a third round of quantitative easing] at the Fed's
September meeting. A stronger number may raise more questions about
what the Fed is likely to do."
In earnings news, International Consolidated Airlines slid 3.8%, after
it said that it expects to post a loss in 2012 as the Spanish economic
situation worsens. "In light of the Spanish macro headwind, we now
expect to make a small operating loss in 2012," the company said.
However, trading conditions at British Airways remained firm and the
integration of regional carrier bmi is on track.
Royal Bank of Scotland was the biggest gainer on the FTSE 100 index
Friday, rising 4.7%. Its first-half net loss widened to GBP1.99
billion and the bank warned that it faced several potential lawsuits
over allegations that it tried to fix interbank lending rates.
However, much of the performance was already priced in, with the
shares down 34% in the past 12 months, versus a 1% gain for the FTSE
100.
In the insurance sector, Allianz gained 3.8% and AXA ticked up 0.9%.
Allianz reported a rise in earnings in the second quarter, helped by
lower writedowns on Greek and other sovereign debt, while French peer
AXA saw a drop from a year earlier when asset sales boosted earnings.
The euro bounced back against the dollar, after slumping to a one-week
low Thursday following the disappointment in the ECB's monthly
address.
At $1.2214, the euro was ahead of its $1.2181 level in New York late
Thursday. The dollar was unchanged against the yen at Y78.23. Nymex
September-delivery crude recovered slightly after hitting a
six-session low Thursday. By 0810 GMT it was up $0.99 at $88.12 per
barrel, while the September Brent contract was $1.03 higher at
$106.93. Spot gold was up $7.60 at $1594.20 per ounce. The September
bund contract was off 0.32 at 144.56 as investors crept back towards
assets such as equities.
Write to Andrea Tryphonides at andrea.tryphonides@dowjones.com;
Twitter: @ATryphonides
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
August 03, 2012 04:39 ET (08:39 GMT)
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