European Stocks Break 5-Day Losing Streak
European stocks ended firmly higher Wednesday, breaking a five-day losing streak on the back of optimism regarding the U.S. economy as data showed a smaller-than-expected contraction in the services sector.
The ISM reported its nonmanufacturing index, which measures the performance of the services sector, rose to 49.3 for February from 44.6 in January. Although still in contraction territory, the index was better than market expectations of around 47.
European stocks dipped mid-afternoon after the ADP report showed U.S. private sector jobs fell by 23,000 in February. The major indexes started in the green due to reports that U.S. bond insurer Ambac is closer to a possible bailout.
Ambac is looking to raise capital to maintain its top credit rating at its main unit before Moody's and Standard & Poor's considers stripping the company's main insurance unit of its top "triple-A" rating.
Talks about a deal are expected to continue throughout the night in New York and no deal has been reached yet, CNBC has learned.
In the European financial sector, Credit Agricole's fourth-quarter losses came in larger than expected as it booked $5.01 billion in writedowns due to the global credit crunch. The French bank said it was not eyeing acquisitions near term, which lifted shares 5.8 percent higher.
Staying in the financial sector, shares in HBOS, Britain's biggest mortgage lender, rose 5.7 percent after ABN Amro upgraded the stock to "hold" from "sell," citing attractive valuations.
Shares in HSBC also gained 2.5 percent after news it had cleared one hurdle in its $6.3 billion bid for a controlling stake in Korea Exchange Bank. On Monday, HSBC reported a 10 percent rise in 2007 profit.
"We believe that HSBC's valuation remains compelling … with a strong balance sheet and relatively limited structured credit market exposure," Citigroup said in a note on Wednesday, reiterating its "buy" recommendation on the stock.
Adidas also failed to meet analysts' expectations on fourth-quarter earnings after sales at its Reebok brand fell and its U.S. business remained weak. The sports apparel maker confirmed its sales and earnings outlook for 2008. Shares closed 0.3 percent higher.
In the UK, ITV confirmed its turnaround plan is on track as it delivered solid full-year earnings. The commercial broadcaster said it is outperforming the market in revenue and ratings. Shares rose 2.3 percent at the market open. Shares gained 1.4 percent.
In the energy markets, oil hit a new record high and hovered below $104 after OPEC ministers ignored global pressure and kept production unchanged and the U.S. government reported a surprise drop in crude oil stockpiles.
The euro also reached a record high versus the dollar, above $1.53.
- Reuters contributed to this report.