Focus on Tech Stocks, Oil Pushes European Markets
Wall Street’s holiday Monday did little to slow resurging European stock markets, where broad blue-chip indexes hit record highs.
But some of Asia’s key markets closed lower, deepening losses that are making U.S. and European stocks’ performance this year look that much better.
In energy trading, crude oil prices in Europe hit fresh 10-year highs as traders bet that little would come of President Clinton’s meeting this week with Crown Prince Abdullah of Saudi Arabia.
The stars of Monday’s trading were Europe’s markets, led by strong gains in tech and telecom shares in France, Germany and Sweden. The French market rose 1.6% while the German market gained 1.4%.
The Eurotop 300 index, which tracks the 300 largest European companies by market capitalization, hit a record high for a second consecutive session, rising 0.7% to 1,704.96.
Year-to-date the index is up 7.7%, more than double the 3.5% price gain of the U.S. Standard & Poor’s 500 index.
The French, Dutch and Danish markets closed at record highs Monday, while Britain’s FTSE-100 index edged up to its highest close of 2000.
Traders said investors are pouring back into tech and telecom issues in part because of rising European interest rates, which are expected to slow earnings growth for many companies. Last week the European Central Bank raised its benchmark short-term rate from 4.25% to 4.5%.
Investors looking for companies whose growth may hold up well are picking old favorites in the tech and telecom sectors, analysts say.
France Telecom and Deutsche Telekom topped the list of blue-chip gainers Monday, up 6.9% and 6.1%, respectively.
Internet stocks also have been hot again in Europe, fueled by a raft of takeover news in the sector that is sending investors scrambling to make bets on consolidation opportunities.
German Internet service provider T-Online jumped 5.2% after it agreed to acquire Spanish portal operator Ya.com Internet Factory.
British e-commerce company Scoot.com surged after the firm denied it had received an offer from French conglomerate Vivendi, but said it was conceivable Vivendi might increase its stake in the business.
Despite higher European interest rates, the euro currency continues to struggle: It ended in Europe on Monday at about 89.8 U.S. cents, down from about 90 cents Friday.
Meanwhile, key Asian stock markets fell Monday. Japan’s Nikkei-225 index eased 51.57 points, or 0.3%, to close at 16,688.21, its fifth straight loss. Year-to-date the Nikkei is down 11.9%, as investors question Japan’s economic recovery.
In South Korea, the composite index sank 1.6%, leaving it down 33.7% for the year. Malaysia’s main index slid 3.1% on Monday.
But Hong Kong’s Hang Seng index jumped 2.3%, leaving it up 4.6% for the year, on hopes that interest rates are stabilizing.
In Latin America, Mexico’s IPC index rose 0.8% on Monday to 6,775.97 in quiet trading. It is down 5% this year. Brazil’s main index gained 0.2% and is up 3.1% for the year.
In commodities trading, oil prices in London hit a 10-year high as dealers grew convinced that any imminent supply increase by major exporters would fail to tame runaway prices.
North Sea benchmark Brent crude traded at $32.80 a barrel, up $1 for the session.
Traders don’t expect much from this week’s meeting between Clinton and Saudi Arabia’s crown prince. They are to discuss ways to bring down global oil prices.
Oil dealers so far have been unimpressed by Saudi Arabia’s vow last week to lift supplies to lower prices. A Saudi delegate to the Organization of Petroleum Exporting Countries said Thursday the kingdom could push for more than an expected 500,000 barrels a day increase in the cartel’s output when OPEC meets Sunday in Vienna.
OPEC President Ali Rodriguez expressed confidence Monday that the oil cartel would move to curb high oil prices, but said consuming nations also had a duty to contribute to market stability.
Under the terms of its informally agreed price band mechanism, OPEC is due to raise output by 500,000 barrels per day if its basket price stays above $28 a barrel for 20 working days.
Unless prices drop dramatically, that point will be reached Friday. The price of OPEC’s basket of seven crudes rose again Friday to $31.73 per barrel from Thursday’s $31.71.
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European Stocks Hit New Highs
The Eurotop 300 index, which tracks Europe’s 300 largest companies by stock market capitalization, rose to a record on Monday as technology and telecom stocks resurged.
Monthly closes and latest for the Eurotop 300 index
Monday: 1,704.96
Source: Bloomberg News
