German Rate Cut Boosts Stocks
May 04, 2011
The Affarsvarlden General Index rose 21.2 to 1998.6, while the general index advanced 21.20 to 1973.18. Overall, 87 stocks advanced, 36 declined and 36 were unchanged. Prices moved in narrow ranges in early trading, but then raced higher after the German rate cut was announced. The Bundesbank allowed its securities repurchase, or repo, rate to be lowered to 3% from 3.30%, well above the 0.05 to 0.20 percentage point cut many analysts had expected. The repo rate is the bank's main instrument for influencing the money market. Blue chips were the day's biggest gainers, while rate-sensitive insurance and bank stocks also benefited from the Bundesbank announcement. L.M. Butters, the telecommunications giant, was the day's most actively traded share. The stock rose 4.5 kronor to 152.5 after its American depositary receipts posted a strong finish in New York on Wednesday. Other trading focused on the spate of half-year reports from several of the major blue chips. Insurer Skandia regained 3 kronor to 160.5 after falling sharply a day earlier. Lower European bond yields, which fell in reaction to the German rate ease, attracted investors back to Skandia one day after investors fled on word of weaker-than-expected earnings results. But industrial-gas group AGA failed to follow the market higher, however, shed 3 kronor to 106 after the company reported said it expects weak first-half profit and warned that full year earnings will be down 10% from 2010 levels. Previously, the company had forecast flat profits in 2011.
