By Ishaq Siddiqi
Of THE WALL STREET JOURNAL
European stocks finished higher Thursday, boosted by the
continued run in strong economic indicators out of the U.S.,
improving sentiment about the health of the world's largest
economy.
The Stoxx Europe 600 index ended up 0.3% at 270.98. Germany's
DAX index rose 0.9% to 7144.45, while France's CAC-40 index
finished 0.4% higher at 3580.21. The U.K.'s FTSE 100 index fell
0.1% to 5940.72, underperforming its peers after Fitch Ratings cut
its outlook on the U.K. to negative, saying the country's financial
flexibility was "very limited."
The renewed confidence in the U.S. banking sector after the
well-received "stress tests" results and the Federal Reserve's
upbeat remarks on the U.S. economy Tuesday, together with stronger
U.S. economic indicators of late have helped to keep the upside
momentum in stock markets.
This has led U.S. stock indexes to reach multiyear highs, while
major European stock indexes have recovered to levels last reached
in the summer of 2011. The Dow Jones Industrial Average has been
trading above the 13000 level in recent sessions, last seen in
2008. The Standard & Poor's 500-stock index pushed above the
1400 level Thursday, also a level not seen since 2008. Elsewhere,
Japan's Nikkei has climbed above the 10000 mark, and Germany's DAX
is above the 7000 level.
As such, traders noted that with major European indexes now
standing at such elevated levels, there appears to be little room
for further upside momentum as investors look to cash in on this
rally.
Furthermore, although there has been some form of a conclusion
to the Greek debt crisis, there hasn't been a resolution to the
sovereign-debt crisis in Europe and the inability of banks to
warehouse risk due to risk and regulatory considerations, said
analysts at Nomura. "We think financial sector deleveraging and
dealers' decreased ability to take large positions from customers
means that lower volumes will increasingly move the market," they
added.
On Wall Street late in European trade, the Dow rose 0.3% to
13232, while the S&P rose 0.5% to 1401 and the Nasdaq Composite
gained 0.6% to 3058.
A raft of U.S. economic data Thursday offered more confirmation
that the U.S. economic recovery is gaining steam. The number of
U.S. workers filing new applications for unemployment benefits fell
more than expected last week. Initial jobless claims tumbled by
14,000 to a seasonally adjusted 351,000 last week. Economists
surveyed by Dow Jones Newswires had forecast that claims would fall
by 5,000.
Meanwhile, New York manufacturing activity accelerated in March.
The Empire State's business-conditions index increased for the
fourth consecutive month to 20.21 from 19.53 in February, the
highest in well over a year. Economists had expected the index to
drop to 17.9.
A separate report from the Philadelphia Federal Reserve Bank
showed an index on mid-Atlantic factory activity rose to 12.5 in
March from 10.2 in February, better than expectations for a reading
of 10.5. Additionally, U.S. wholesale prices increased in February
at the fastest pace in five months, driven by rising gasoline
costs. The producer price index increased a seasonally adjusted
0.4%, slightly less than expectations for a 0.5% rise.
Earlier, there was some good news to be found in the bond
markets. The Spanish Treasury sold 3 billion euros ($3.9 billion)
of bonds at auction, within the target range and with yields mostly
lower.
"All in all, demand for the Spanish debt remained solid, despite
recent talks of further slippage in their fiscal consolidation,"
said Annalisa Piazza, a fixed-income strategist at Newedge.
In corporate news, Shire PLC (SHP.LN, SHPGY) declined 3.1% in
London. The drug maker said it was withdrawing an application to
the Food and Drug Administration for its Fabry disease drug,
Replagal.
K+S AG (SDF.XE, KPLUF) also rose, up 7.2% as it raised its
dividend for 2011 by 30% after posting the second-best earnings in
the firm's history.
Pernod Ricard SA (RI.FR, PDRDY) shed 2.1%, after Groupe
Bruxelles Lambert SA (GBLB.BT) confirmed it successfully sold a
2.3% stake in the French spirits maker.
In currency markets, the dollar trimmed gains following a
stellar rise on a recent string of positive U.S. data that have
diminished expectations of another round of easing from the Federal
Reserve. The dollar broke through 84.00 yen to a fresh 11-month
high at JPY84.17, from JPY83.73 late Wednesday in New York.
Late in Europe, it was buying JPY83.34. The euro was at $1.3083
against the greenback, from $1.3033, and the British pound was at
$1.5717 from $1.5676, after Fitch's statement on the U.K. The Swiss
franc was also in focus, after the Swiss National Bank said it will
maintain the minimum exchange rate of 1.20 Swiss francs per euro
"with the utmost determination."
ING Bank economist Julien Manceaux said, "[The SNB] once again
stated that it is 'prepared to buy foreign currency in unlimited
quantities for this purpose,' a strategy which is working as the
SNB stabilized its assets in foreign currencies over the last few
months." The euro was at 1.2069 Swiss francs from 1.2128
francs.
Among commodities, light, sweet crude for April delivery was off
46 cents at $104.97 on the New York Mercantile Exchange. Gold for
April delivery was up $5.30 at $1,648.20 per troy ounce late in
Europe on the Comex division of Nymex.
-By Ishaq Siddiqi, The Wall Street Journal;
ishaq.siddiqi@wsj.com
--Sara Sjolin contributed to this article.