Plus   Neg

European Markets Declined After French Downgrade Rumor

European markets largely finished to the downside Thursday. The markets were impacted by rumors in early trade regarding France and by the results of the Spanish bond auction. Bank stocks were under pressure again Thursday, but miners were among the gainers. Weak economic reports from the U.S. also contributed to the negative mood across the Atlantic.

There were rumors early Thursday of a potential downgrade of the sovereign debt rating of France by one of the major ratings agencies. The rumors were denied later in the day, but still had a negative impact on the French market.

France saw strong demand for its debt in an auction on Thursday, but the country's five-year borrowing costs increased. The Agence France Tresor raised EUR 7.973 billion from the sale of its medium term debt, which was close to the maximum target of EUR 8 billion set for the sale. The yield on the February 2017 treasury notes known as BTANs rose to 1.83 percent from 1.78 percent in the previous sale in March.

Spain also saw strong demand for its debt during an auction on Thursday, but borrowing costs continued to rise amid increasing concerns that the country may be forced to seek a bailout.

The Spanish Treasury sold EUR 2.54 billion of 2 and 10-year bonds, slightly exceeding the EUR 2.50 billion maximum target set for the sale. The yield on the 10-year benchmark bond rose to 5.743 percent from 5.403 percent in the previous auction in January.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 1.76 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, finished lower by 0.40 percent.

The DAX of Germany declined by 0.90 percent and the CAC 40 of France fell by 2.05 percent. The FTSE of the U.K. dipped by 0.01 percent, but the SMI of Switzerland increased by 0.49 percent.

In Frankfurt, Volkswagen declined by 3.42 percent. Its Audi unit said its board of management and supervisory board approved plans to build a North American plant in Mexico.

Shares of Beiersdorf increased by 2.52 percent, after Exane BNP upgraded the stock to "Outperform" from "Neutral."

Commerzbank finished lower by 2.38 percent and Deutsche Bank fell by 2.14 percent.

In Paris, Publicis Groupe dropped by 4.10 percent. The advertising and communications company said it expects growth to slow down in the second quarter.

Likewise, media and telecom group Vivendi fell by 2.67 percent, saying that it expects 2012 revenue growth to be in the mid 30's at constant currency.

Shares of Societe Generale fell by 5.19 percent. Credit Agricole dropped by 4.32 percent and BNP Paribas lost 4.82 percent.

In London, Cable & Wireless Worldwide sank by 8.23 percent, after Tata Communications confirmed that it does not intend to make an offer for the telecom company. Vodafone confirmed that it will not abandon its offer to acquire Cable & Wireless Worldwide. Vodafone finished higher by 1.44 percent.

Anglo American dipped by 0.19 percent, after the company announced that first quarter iron-ore production increased by 17 percent.

GlaxoSmithKline finished higher by 0.87 percent. The company's $13 per share offer to acquire Human Genome Sciences in the U.S. was rejected by HGSI's Board of Directors.

Hargreaves Lansdown gained 4.67 percent. The investment firm reported a 2.6 billion pound increase in assets under administration for the quarter.

IMI PLC climbed by 1.51 percent. Jefferies upgraded its rating on the stock to "Buy" from "Hold."

The German economy is expected to grow at a slightly faster pace than estimated in 2012, as the risks surrounding the global economy receded, according to a joint report published by the country's leading economic research institutes on Thursday. The gross domestic product is forecast to rise 0.9 percent this year, slightly faster than the previously projected 0.8 percent growth. For 2013, the institutes forecast 2 percent growth.

New claims for U.S. unemployment benefits showed a modest decrease in the second week of April, but revised data for the previous week put the level of initial jobless claims significantly higher than most economists had predicted.

According to a report released by Labor Department on Thursday, new unemployment claims for the week ended April 14th came in at a seasonally adjusted level of 386,000. The figure for the latest week reflects a decrease of 2,000 compared to the previous week's revised level of 388,000 new claims. However, the revised figures for the previous week were above initial estimates that put the level of new claims for the week at 380,000. Most economists had expected new claims to fall to a level of 365,000.

Existing home sales in the U.S. showed an unexpected decrease in the month of March, according to a report released by the National Association of Realtors on Thursday, although sales remain above the level seen in the same month a year ago. NAR said existing home sales fell 2.6 percent to an annual rate of 4.48 million in March from an upwardly revised 4.60 million in February. The drop surprised economists, who had expected existing home sales to edge up to 4.62 million from the 4.59 million originally reported for the previous month.

While a report released by the Federal Reserve Bank of Philadelphia on Thursday showed a modest expansion in regional manufacturing activity in the month of April, the index of activity in the sector fell by much more than economists had been anticipating. The Philly Fed said its diffusion index of current activity fell to 8.5 in April from 12.5 in March, although a positive reading still indicates an increase in manufacturing activity. Economists had expected the index to edge down to a reading of 12.0.

Pointing to a more positive outlook, the Conference Board's leading economic index for the U.S. increased for the sixth consecutive month in March, according to a report released on Thursday. The report showed that the leading economic index rose by 0.3 percent in March following a 0.7 percent increase in February and a 0.2 percent increase in January. Economists had been expecting the index to increase by 0.2 percent.

by RTTNews Staff Writer

For comments and feedback: editorial@rttnews.com

Market Analysis

Follow RTT