By Carla Mozee, MarketWatch Nomura turns bullish on the
luxury-goods sector
LONDON (MarketWatch)--European stocks ended with a whimper
Wednesday, giving up a stronger lead following three straight
sessions of advances.
Equities across Europe had been higher after European Central
Bank Vice President Vitor Constancio said the bank is prepared to
buy government bonds early next year if it decides there's a need
to ramp up stimulus measures as the eurozone struggles with low
inflation and sluggish growth.
"We have, of course, to closely monitor if the pace of its
evolution is in line with that expectation. In particular, during
the first quarter of next year we will be able to gauge better if
that is the case," Constancio said.
The Stoxx Europe 600 was up by as much as 0.4% after
Constancio's comments, but the rise was eventually whittled down,
leaving the index to close unchanged at 346.28.
"That price action doesn't really surprise me because we've seen
a bit of a run higher lately," and the market is running into lower
liquidity levels as it enters the holiday season, starting with the
U.S. Thanksgiving holiday on Thursday, said Matt Weller, senior
technical analyst at Forex.com, in an interview.
Caution may also be setting in ahead of key economic data
including inflation figures from the eurozone, he said. European
equities have risen since Friday, with the win streak kicked off
after ECB President Mario Draghi said policy makers are set to
expand stimulus efforts if needed to fend off low inflation.
"Some traders were looking for QE as soon as the ECB's meeting
next week, and based on some of [Constancio's] comments, it sounds
like that might have been a bit premature," said Weller. "Maybe the
fact that liquidity is probably coming--but coming a little bit
later than some expected--is prompting some traders to take
profit."
Stocks in some of Europe's periphery countries fell, leaving
Italy's FTSE MIB down 0.4% at 19,938.42. Spain's IBEX 35 fell 0.5%
to 10,647, and Portugal's PSI 20 fell 0.9% to 5,291.66. But Greek
stocks outperformed, putting the Athex Composite up by 1.5% at
976.65.
Among major indexes, Germany's DAX 30 climbed 0.6% to 9,915.56,
and the U.K.'s FTSE 100 slipped 2 points to 6,729.17. France's CAC
40 fell 0.2% to 4,373.42.
The euro (EURUSD) had moved lower after Constancio's comments on
Wednesday, but regained ground against the dollar to buy $1.2502
compared with $1.2473 in North America late Tuesday. The dollar
came under pressure after a round of weak U.S. economic data.
European Commission President Jean-Claude Juncker unveiled a
five-year, EUR315 billion private-public investment plan. The plan
aims to encourage economic growth by funding infrastructure
projects throughout the European Union.
"Europe needs a kick-start, and today the commission is
providing the jump leads," Juncker told the European Parliament in
Strasbourg, media reports said.
Among individual stocks, shares of Thomas Cook Group PLC sank
17.7% after the travel company forecast a more moderate pace of
growth this year because of a tougher trading environment. Thomas
Cook said Chief Executive Harriet Green will step down immediately
and be replaced by Chief Operating Officer Peter Fankhauser.
Shares of Seadrill Ltd. slid 21% as the Norwegian oil services
company said it would suspend dividend payments and cut debt, the
moves coming after a fall in third-quarter net profit.
The European luxury-goods sector was upgraded to bullish from
neutral at Nomura, while analysts at Exane BNP Paribas said the
sector is "close to a turning point", with a "triple whammy
positive playing out" that would likely send related stocks higher
in 2015. See slideshow about what the analysts are saying about
luxury goods.
Shares of Hugo Boss AG climbed 2.4% after an upgrade to neutral
at Nomura. Gucci parent Kering SA picked up 0.3% after Exane lifted
its rating to outperform.
In the fixed-income market, Germany's 10-year government bond
yielded 0.74% following a bond auction that fell short of the EUR4
billion target.
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