Europe Open Higher, But May Trade Flat As 2Q GDP Falls 0.2%

August 14, 2008 7:38 a.m. EST

London, UK (AHN) - European markets rose Thursday, led by the resources sector and higher raw-material costs and oil prices.

But the upward momentum may not continue as a report showed that the region's economy contracted in the second quarter for the first time in 10 years on weak earnings and higher inflation.

The European Union statistics office in Luxembourg said on Thursday that Europe's Gross domestic product fell 0.2 percent compared to the first quarter's rise of 0.7 percent.

The report also showed a 1.5 percent decline in the annual rate during the period ending June 30, which is down for the third consecutive quarter.

The pan-European Dow Jones Stoxx 600 increased by 0.67 percent to 284.44, reducing the year-to-date losses by 21.48 percent in 2008.

In late morning trading, the FTSE 100 was trading flat at 5,507.50 points. Frankfurt's DAX was increasing by 26.97 points or 0.42 percent at 6,449.16 points.

At the same time, the CAC 40 in Paris was trading up by 42.18 points or 0.96 percent at 4,445.15 points.

Traders seemed confident in the mining and energy industries as resources producers may benefit from the strengthening U.S. dollar in major markets as well as rising commodity prices.

The upward trend was led by BHP Billiton Ltd., the world's largest mining company, as it surged to more than 6 percent on rising copper, gold and silver rates.

Shares of Royal Dutch Shell PLC, which is Europe's biggest oil firm, gained by 3.5 percent, followed by BP PLC, adding 2.2 percent in London markets. Total SA, Europe's biggest oil refiner, increased by 1.6 percent.

ThyssenKrupp AG, Germany's largest steelmaker, added 1.3 percent after its earnings dropped to $853 million, beating analysts' expectations.

The nation's second-largest steelmaker, Salzgitter AG, gained 1.1 percent after raising its full-year earnings outlook as its first-half net income advanced 9.6 percent.

In commodities, crude oil moved close to the $111-a-barrel mark in electronic trading on Monday.

The contract was trading up by 1.2 percent to $117.42 a barrel on the New York Mercantile Exchange after a U.S. Energy Department report Wednesday showed a larger-than-expected drop in gasoline inventories.

In the currency market, the euro was trading down by 0.1 percent at $1.4904, which his the lowest since Feb. 26, compared to the $1.5005 closing on Friday last week.