Friday, Aug 17, 2012

--Merkel comments underpin the mood, but equity gains muted

--Caution remains as Merkel comments have disappointed before

--Lonmin shares slump on miner deaths, production worries

 

   By Michele Maatouk 

 

European stocks nudged higher Friday as investors welcomed signs that Europe's policymakers are committed to saving the single currency, but the euro was a little weaker against the greenback, easing back off highs reached overnight.

German Chancellor Angela Merkel's comments Thursday that Germany will do everything it can to maintain the common currency were helping to underpin sentiment. Merkel's comments appeared to back European Central Bank president Mario Draghi's recent pledge to do whatever it takes to save the euro.

"Angela Merkel's statement yesterday that the ECB's insistence on conditionality being attached to any bailout dovetailed with her own priorities demonstrates how European leaders are moving in tandem," said Dolmen Securities.

Overall, though, gains were fairly muted and market commentators were quick to point out that investors have been disappointed by Merkel in the past. At 0810 GMT, the benchmark Stoxx 600 index was up 0.3% at 271.89, after closing at a five-month high on Thursday. The U.K.'s FTSE 100 was up 0.2% at 5846.65, Germany's DAX was 0.2% higher at 7008.66 and France's CAC-40 was up 0.1% at 3482.46. Autos and banks were the best performers, with the Stoxx Europe 600 index for each up 1% and 0.9%, respectively. Technology stocks were also on the front foot, with the sector's index up 0.6%, supported by better-than-expected fourth-quarter results from U.S. bellwether Cisco.

Headlines about Finland's stance towards the euro had little impact on stocks. Finland's Minister for European Union Affairs Alexander Stubb said his country remains totally committed to the euro zone after the U.K.'s Daily Telegraph ran a story saying Finland was preparing for a possible breakup of the currency bloc, according to the country's foreign minister.

Outside Europe's core, Spain's IBEX-35 was up 1.3% at 7508.60 and Italy's FTSE MIB was 0.8% higher at 15,038.22. Bond markets there were subdued. Spain's 10-year government bond yield was down five basis points at 6.47%, while the corresponding Italian yield was flat at 5.77%, according to Tradeweb.

On foreign exchanges, the euro was a touch lower against the dollar, trading at $.2351 from $.2358 after spiking to $1.2373 overnight on Merkel's comments, and easing back from Friday's high of $1.2375. The dollar was at Y79.39 from Y79.34.

On the corporate front, Lonmin slumped 6.1% in London following news that over 30 miners have been killed at the company's Marikana mine in Rustenberg, South African, after recent clashes between police and striking miners. Lonmin said it has lost 300,000 tons of ore as a result and is unlikely to meet its full-year guidance.

"We continue to hold fears over Lonmin's balance sheet," said Credit Suisse. It added that the stock is now a pure play on the platinum price and it continues to remain cautious over the next six months despite the industry volume cuts seen to date.

On Friday's economic calendar, the main focus will be on the U.S, where University of Michigan confidence is at 1355 GMT and leading indicators are at 1400 GMT.

September Nymex crude oil futures were down $0.38 at $95.22 a barrel and the Brent oil contract was down $0.90 at $114.37. Spot gold was at $1,616.80, down $2.50 while the September Bund contract was down six ticks at 141.72.

Write to Michele Maatouk at michele.maatouk@dowjones.com

(END) Dow Jones Newswires

August 17, 2012 04:51 ET (08:51 GMT)