European Markets Rebounded From Early Weakness

(RTTNews) - The European markets were weak in early trade Thursday, due to continued concerns over the situation in Greece. A meeting of Eurozone finance ministers is currently underway in Luxemburg today to discuss the situation. The markets managed to rebound and turn positive in the afternoon, thanks to the strong rally in the U.S. equity markets.

Despite a modest improvement in the economic outlook, the Federal Reserve on Wednesday offered no explicit guidance indicating that it will soon raise interest rates from zero.

As expected, the Fed kept its benchmark interest rate unchanged near zero, where it has been since 2008.

Many market watchers thought the Fed would lay further groundwork for a rate hike as soon as September, but policy makers remain reluctant to tip their hand even though economic activity seems to be picking up after a second consecutive rough winter.

The central bank's forecasts reinforced the view that the eventual increase in rates will be gradual. Tame consumer price inflation data also generated some optimism about the outlook for rates in light of the Fed's insistence that it will be data dependent.

A fourth offering of long-term loans from the European Central Bank witnessed healthy demand from euro area banks, though it may not be a prelude to sharper growth in lending.

Banks took EUR 73.78 billion of long-term loans in the ECB's Targeted Longer Term Refinancing Operation, or TLTRO, on Thursday. Economists had expected a take-up between EUR 60 billion - EUR 75 billion.

The allotment was full at a fixed rate of 0.05 percent to 128 banks. The loans mature on September 26, 2018.

The Swiss National Bank left its key interest rates unchanged in the negative zone and asserted its intention to remain active in the currency market to weaken the franc.

The interest rate on sight deposit at the central bank was maintained at -0.75 percent, and the target range for the three-month libor between -1.25 percent and -0.25 percent.

Negative interest rates make holding investments in Swiss franc less attractive and help to weaken the currency.

Over time, negative interest rates should help to correct the over-valuation of the Swiss franc, SNB President Thomas Jordan said at the press conference. Deterioration in the Norwegian economic outlook due to the oil price slump prompted the central bank to lower its benchmark interest rate to a record low in June and to suggest that more cuts may be in the pipeline.

The Executive Board of the Norges Bank lowered the key policy rate by 0.25 percentage point to 1.00 percent, as already signaled by Governor Oystein Olsen in May. It was in line with economists' expectations.

The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.66 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.07 percent.

The DAX of Germany climbed by 1.11 percent and the CAC 40 of France rose by 0.27 percent. The FTSE of the U.K. gained 0.41 percent, but the SMI of Switzerland finished lower by 0.30 percent.

In Frankfurt, Bayer increased by 2.56 percent and Merck advanced by 2.08 percent. Fresenius gained 2.71 percent and Fresenius Medical Care added 1.33 percent.

Commerzbank rose by 0.61 percent, but Deutsche Bank dropped by 1.77 percent.

In Paris, car parts maker Valeo declined by 2.13 percent. Renault fell by 1.18 percent and Peugeot lost 0.43 percent.

Technip declined by 0.81 percent and Total weakened by 0.20 percent.

In London, Severn Trent dropped by 2.88 percent, after it began trading on an ex-dividend basis.

Mining stocks were among the best performing stocks, due to a surge in gold prices. Anglo American increased by 2.60 percent and Randgold Resources climbed by 2.69 percent. BHP Billiton advanced by 2.38 percent and Fresnillo added 2.11 percent.

Eurozone's labor costs grew sharply in the first quarter at the fastest pace in more than three years, data from Eurostat revealed Thursday. Hourly labor costs grew 2.2 percent annually in the three months to January, following 1.2 percent increase in the previous quarter. It was the fastest rate of growth since the second quarter of 2011, when costs rose 2.5 percent.

U.K. retail sales increased unexpectedly in May as low inflation and strong pay growth underpinned consumer spending. Retail sales including auto fuel rose 0.2 percent in May from April when it climbed 0.9 percent, data from the Office for National Statistics showed Thursday. Although the monthly growth eased from April, this was the second consecutive rise and came in contrast to a 0.1 percent fall forecast by economists.

In another upbeat sign for the U.S. labor market, the Labor Department released a report on Thursday showing a bigger than expected decrease in first-time claims for U.S. unemployment benefits in the week ended June 13th. The Labor Department said initial jobless claims fell to 267,000, a decrease of 12,000 from the previous week's unrevised level of 279,000. Economists had expected jobless claims to dip to 275,000.

While the Commerce Department released a report on Thursday showing a substantial increase in energy prices in the month of May, the report said overall consumer prices in the U.S. rose by slightly less than economists had expected.

The Labor Department said its consumer price index climbed by 0.4 percent in May after inching up by 0.1 percent in April. The increase by the index reflected the largest monthly gain since February of 2013, but it was still slightly smaller than 0.5 percent increase expected by economists.

Manufacturing conditions in the Philadelphia region have improved in June, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday. The Philly Fed said its diffusion index of current activity jumped to 15.2 in June from 6.7 in May, with a positive reading indicating growth in regional manufacturing activity. Economists had expected the index to inch up to 8.0.

Confirming the outlook for more economic expansion in the second half of the year, the Conference Board released a report on Thursday showing another notable increase by its index of leading U.S. economic indicators. The Conference Board said its leading economic index climbed by 0.7 percent in May, matching the increase seen in April. Economists had expected the index to rise by 0.4 percent.