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Wall Street Journal features Stephen Pope & Spotlight Ideas

Friday November 2nd 2012


MARKET COMMENT: Europe Stocks Rise After US Labor Report

By Sara Sjolin


Stronger-than-expected U.S. jobs data boosted European stock markets Friday, with the region's benchmark index posting a 1.6% rise for the week.

The Stoxx Europe 600 index rose 0.4% to close at 274.85, after swinging between small gains and losses ahead of the U.S. data.

The index traded as high as 275.57 during the session, but trimmed gains as worries over the coming U.S. presidential election and Washington's so-called fiscal cliff weighed on investor's minds.

The fiscal cliff refers to a round of massive spending cuts and tax hikes that will automatically take effect unless Democratic and Republican U.S. lawmakers end a stalemate and reach a budget deal.

"It was a good set of numbers, but there could be a lot more growth and more jobs if companies felt a little more at ease with the economic outlook and more sure of how [the U.S.] Congress will respond to the fiscal cliff," said Mike Lenhoff, chief strategist at Brewin Dolphin.

"You can see from earnings results that top-line growth has been disappointing and there's no reason for corporations to think things are going to be different if there's still political uncertainty." he said.

Among Friday's notable movers in Europe, Beiersdorf AG shares rallied 7.2% in Frankfurt. The German personal-care-products firm raised its full-year forecast for sales growth after a strong third quarter.

Shares of Alcatel-Lucent skidded 5.5% in Paris, after results showed the telecom-equipment maker swinging to a loss in the third quarter with revenue dropping 15% in Europe.

For the broader European market, the keenly watched jobs report from the U.S. spurred investors to buy equities. The nonfarm-payrolls data showed 171,000 jobs were added to the economy in October, topping economists' consensus estimate of 120,000.

The unemployment rate, however, ticked up to 7.9% from 7.8%.

But the rise in the unemployment rate was partly due to an increase in the workforce, Lenhoff said.

"If the prospects for jobs are looking up, more entrants into the workforce would be expected...The short-term trend for employment in the private sector is picking up again," he said.

Unemployment has been high on the agenda in the U.S. presidential campaign and with the election looming next Tuesday, analysts were looking closely at the jobs report for hints of a labor-market recovery.

"This is undoubtedly a welcome report for the Obama re-election campaign," said Stephen Pope, managing director at Spotlight Ideas, in a note.

"Of course it is still too close to call, but even with many business leaders supporting the Romney-Ryan ticket, we wonder if the competent handling of the impact resulting from Hurricane Sandy from the administration is going to sway the undecided," he said.

During afternoon action, the Commerce Department said factory orders rebounded 4.8% in September, slightly beating expectations.

A raft of data out of the U.S. on Thursday helped boost the pan-European index to its best daily performance in two weeks, as reports on both employment and manufacturing surprised to the upside.

Meanwhile, data from the euro zone showed the final manufacturing purchasing managers' index for October printed at 45.4, slightly better than a previous estimate of 45.3.

In London, shares of Admiral Group PLC slumped 5.3%, after the car insurer said third-quarter group turnover was down by 2%.

Royal Bank of Scotland Group PLC shares lost 2.1% after the bank said it had a third-quarter loss of 12.5 pence (20 cents) per share, a reversal from a profit of 11.3 pence in the year-earlier period.

Shares of Standard Chartered PLC picked up 1%, as most risk-sensitive stocks such as banks and resource firms were on the rise.

The FTSE 100 index rose 0.1% to 5,868.55, and ended the week 1.1% higher.

In Frankfurt, the DAX 30 index picked up 0.4% to 7,363.85, with Beiersdorf posting the biggest gain. On a weekly the basis, the DAX gained 1.8%.

Shares of Deutsche Telekom AG dropped 2.6%, after German Daily Handelsblatt reported that dividend payouts from the telecom carrier could be cut by a third for 2013.

And in Paris, the CAC 40 index closed 0.5% higher at 3,492.46, with shares of Societe Generale SA up 1.5%. The index closed out the week 1.7% higher.

Veolia Environnement SA shares picked up 1.1%, as Goldman Sachs lifted the stock to buy from neutral, according to Dow Jones Newswires.


Write to Sara Sjolin at AskNewswires@dowjones.com

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