Thursday May 8, 09:12 AM
Euroshares open lower after Wall St decline, ECB and BoE in focus UPDATE
(Updating with full report)
LONDON (Thomson Financial) - Europe's leading exchanges lost ground in opening deals following a sharp decline on Wall Street overnight on the back of soaring oil prices, while European investors are
expected to focus on today's interest-rate setting decisions by the European Central Bank and the Bank of England.
At 08:45 a.m., the DJ STOXX 50 was down 17.41 points or 0.53 percent to 3,269.09, while the DJ STOXX 600 lost 1.79 points or 0.54 percent to 327.56
On the other side of the Atlantic, Wall Street tumbled as the price of oil soared towards $124 per barrel and touched off concerns that the stock market's recent gains might have been premature as consumers grapple with rising energy and food costs.
While stocks pulled back, the day was not without good news. The U.S. Labor Department said labour costs rose at an annual rate of 2.2 percent during the first quarter, down from a 2.8 percent rise the previous quarter, suggesting that inflation pressures may be letting up.
The DJIA ended the day 206.48 points or 1.59 percent lower at 12,814.35, while the S&P 500 closed down 25.69 points or 1.81 percent at 1,392.57. The tech-laden Nasdaq (NASDAQ: news) was down 44.82 points or 1.80 percent at 2,438.49.
World (WRGR.TA - news) oil prices struck a fresh intra-day record of $123.87 a barrel in Asian hours on Thursday despite a bigger-than-expected rise in U.S. energy stocks.
Gold prices dipped Wednesday, as the stronger dollar reduced the precious metal's appeal as an alternative investment, and as oil prices eased. Other precious metals also eased.
Back in Europe, the interest-rate setting decisions by the European Central Bank and the Bank of England will be in focus today.
'We are expecting it to be a slow morning as all eyes will be on the BoE and then later the EU central bank rate cut announcements. While no cut is expected, traders will be watching the language of the announcement for clues of what the bank is thinking of doing next,' David Evans, market analyst at BetOnMarkets.com said.
Meanwhile, the earnings season continues.
Shares in Vallourec (Paris: FR0000120354 - news) shed 4.8 percent in early deals after its first-quarter earnings report, released last night, missed expectations.
In response, Merrill Lynch (NYSE: MER - news) cut its stance on the stock to 'neutral' from 'buy' noting that the French steel tubes maker indicated that re-pricing of contracts outside the U.S. will only happen in 2009, later than the broker was expecting.
The news also weighed on sector peers such as Salzgitter, which fell 1.46 percent.
Also a major faller following results was Inbev (Brussels: INB.BR - news) , down 5.3 percent after it posted an unexpected drop in first-quarter profit, blaming tough comparatives, poor weather, commodity costs and inflation.
Gerard Rijk, analyst at ING, noted the results were overall weak.
'It is just an awful combination of high costs of goods sold, issues with Brazilian volume and pipeline problems in Russia,' the analyst said.
And in Milan, shares in UniCredit SpA lost 2.6 percent after the bank cut its earnings per share target for this year and announced first-quarter results that disappointed market expectations in terms of revenues.
The bank (NASDAQ: TBHS - news) said it expects EPS to come in between 0.52 and 0.56 euros per share against an earlier expectations of an EPS at the end of this year of 0.66 euros per share.
Over in Germany, Munich Re shed 2.13 percent after it presented an unimpressive set of first-quarter results, which included a drop in net profit and a worse-than-anticipated combined ratio.
Telecoms giant Deutsche Telekom (Xetra: 555750 - news) lost 0.5 percent after its first-quarter results came in largely in line. Merrill Lynch reiterated its 'sell' stance on the stock and noted that currency headwinds will persist.
Turning to the leader board, Unilever (LSE: ULVR.L - news) added 4.5 percent in London after the Anglo-Dutch consumer goods group reported first-quarter sales growth which was ahead of market expectations.
Underlying sales increased by 7.2 percent during the quarter. Market forecasts had ranged between 5.2 and 6.3 percent with the consensus at 5.7.
Citigroup (NYSE: C - news) reiterated its 'hold' rating and said the results were 'undoubtedly strong'.
Among financials, Deutsche Postbank (Xetra: 800100 - news) advanced 2.46 percent after beating market expectations. The group released a quarterly pretax profit of 166 million euros, down from 222 million, but ahead of the 137 million seen by analysts.
Looking ahead, investors are expected to cast an eye over to the U.S. later in the day, where data on initial jobless claims and wholesale inventories are due for release.
Economists expect initial jobless claims to ease to 370,000 in the week ending May 3. In the previous week, claims increased 35,000 to 380,000.
Meanwhile, wholesalers are expected to have increased their inventories in March by just 0.5 percent, well below the 1.1 percent accumulation rate in the previous month.
'We believe that some unnecessary inventory building has occurred in the wholesale sector, forcing firms to cut production and liquidate stocks,' said economists from Lehman Brothers (NYSE: LEH - news) .
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