European Markets: Strong Financials, No Direction

The global equity markets continue to lack solid direction on Wednesday, as investors are not sure if the current valuation reflects the outlook of the global economy.

After three weeks of very strong gains, the global equity markets seem to have paused. Investors witnessed only choppy trends during the last few sessions, with the major indexes swinging around the breakeven line most of the time.

On Wednesday, the European indexes followed the same pattern, moving in a small range around the opening bell price. None of the biggest 15 European stock markets moved more than 1%, something that suggests traders’ lack of interest. Even the Eastern European stock markets, which are usually more volatile, saw relatively small momentum in the session.

The best performing sector in the Europe was again the financial sector, as banks received a big boost from the quarterly reports of Societe Generale (SCGLY.PK) and Lloyds. The two companies surged 6.50%, and 8.50%, being the best performing stocks in the regional markets, Societe General in the Cac 40 and Lloyds in the FTSE index. However, the gains in the financial sector were offset by the declines seen in the raw material sector.

Throughout the European session, a report showed U.K. house prices increased in July by 1.1% for the second time over the last three months. Moreover, a different report showed that the U.K. service side of the economy expanded for the third consecutive month in July, a very positive note since the service side represents two thirds of the British economy.

Taken together, these reports suggest that the U.K. economy may be bottoming out, even though some parts of the economy, like unemployment or credit, are likely to lag behind, slowing down the recovery phase. Interestingly enough, the same phenomenon can be seen in the other major economies as well, which suggests it is a global problem rather than a regional one.

Overnight, the U.K. FTSE gained 3.50 points (0.08%) to 4,639.50, while the German Dax fell 9.00 points (0.17%) to 5,409.50.

Crude oil for August delivery was recently trading at $71.80 per barrel, higher by $0.40.

Gold for August delivery was recently trading lower by $1.90 to $967.80.

Disclosure: No positions