1:30PM NY – 6:30PM Frankfurt – Rising oil prices drag European markets lower at close.

European markets closed lower across the region led by a decline of 1% in Switzerland and 0.6% decline in Germany, France and the Netherlands. U.K. markets closed lower by a fraction.

Volatile oil price shot up more than $5 on rumors of Iranian missile launch targeting American ships. Rumors were denied by the U.S. Navy but oil managed to close up more than $1 per barrel.

BP (BP: chart) and Royal Dutch Shell closed higher at close however, mining companies Rio Tinto (RTP: chart) and BHP Billiton (BHP: chart) closed lower.

Auto stocks in France closed lower on rising oil prices. Renault declined close to 1%. Airline stocks also fell led by a drop in Air France-KLM and British Air. British Air dropped after Times of London newspaper reported that it is considering to bid for a stake in local carrier BMI.

Bank stocks came under pressure after ABN Amro (ABN: chart) said that it will explore all options if talks with Barclays are not successful. The bank also urged shareholders to disregard an activist motion to breakup bank in several parts. Austrian bank Raiffeisen fell 3% on fourth quarter earnings rise of 51% but weak guidance for the year 2007.

ArcelorMittal (MT: chart) chairman Laxmi Mittal said in a New York meeting to investors that the company is seeking opportunities to expand beyond its roots in steelmaking. The company is likely to diversify into other metals making and deepen its iron ore mining operations. The company currently mines 45% of its iron ore needs and is likely to meet its 75% needs internally by the year 2010. The company also views opportunity in increasing its metals distribution business in Europe and the U.S. and thinks that tubes and pipes business can add value to its operations.

French tube maker Vallourec rose 4% on the rumors that ArcelorMittal may bid for the company. Arcelor denied that it is interested in the company.


11:45 AM NY – The Fed chairman said in his testimony that inflation is ‘uncomfortably high’.

In a prepared testimony to the Joint Economic Committee of Congress the Fed Chairman Bernanke issues cautious guidance for the economic growth and inflation. He said that his business scenario counts on businesses to increase their capital spending at a moderate pace in the months to come and consumer spending is likely to remain solid. The outlook for housing market remains uncertain and sub-prime lending related issues appear to be contained and are not spreading in the economy.

He expects the economy to continue to grow at moderate pace in the coming quarters despite slow capital spending from businesses. Mr. Chairman also struck optimistic view on consumer spending and added, “the continuing increases in employment, together with some pickup in real wages, have helped sustain consumer spending, which increased at a brisk pace during the second half of last year and has continued to be well maintained so far this year. Growth in consumer spending should continue to support the economic expansion in coming quarters.”

Real economic growth has slowed in the last five quarters and in the second half of the year 2006 the rate of growth had declined to 2% and is likely to be repeated at the similar pace in the current quarter. Housing market is likely to a drag on the economy in the coming quarters as lending standards are tightened.

The Chairman noted that the overall inflation as measured by Consumer Price Index has declined to 2.4% last year ending in February from 3.6% a year ago. Core inflation during the same period was 2.7% compared to 2.4% a year ago. He said that core inflation slowed modestly in the second half of last year, but recent readings have been somewhat elevated and the level of core inflation remains uncomfortably high. Increase in rent paid for real estate account substantial part of increase in core inflation.


10:30AM NY – U.S. stocks trade lower led by another decline in housing sector.

U.S. market averages after thirty minutes of trading are in the negative territory. Oil is trading $1.20 per barrel higher to $64.20 and trades indicate oil may trade higher in the coming days. Last week U.S. reported less than expected decline in oil and gasoline inventory. Tensions in the middle-east remain high and U.K. releases what they claim to be evidence that British sailors were seized by Iran in international zone.

Tech stocks fell at the opening along with broader market averages but managed to rebound after fifteen minutes of trading. Google, Yahoo, Accenture and Motorola gained.
Accenture rose on better than expected earnings.

ADRs of China related stocks fell in the morning trading but Chinese tech stocks rose along with the U.S. stocks. Asian markets slumped sharply in the overnight trading. China, India, Singapore and Japan closed lower.

Oil complex stocks rose mildly on the higher oil prices. Norfolk Southern (NS: chart) traded higher on the news that the company is planning to buyback shares. The company raised its buyback program to 75 million shares from 50 million and reduced its buyback time to Dec 31, 2010 from Dec 31, 2015.