The European markets finished to the downside Friday, dragged lower by weak economic results across the globe. A weaker than expected manufacturing report from China proved to be a precursor to several weaker than expected manufacturing reports from countries across Europe. However, the disappointing U.S. employment report appears to have had the largest impact on investors, sending investors on a search for safe havens. Financial stocks were under pressure on Friday, as well as miners and automakers.
The International Monetary Fund on Thursday denied that it is planning financial assistance for Spain, which is currently reeling under recession and a worsening banking sector crisis. Responding to queries at a regular press conference, IMF External Relations Department Director Gerry Rice said the Fund "is not drawing up plans that involve financial assistance for Spain, nor has Spain requested any financial support from the IMF."
The British Chambers of Commerce lowered its economic growth forecasts for this year and called on the government to initiate measures aimed at boosting growth. In its latest Quarterly Economic Forecast, the group said it expects the economy to grow 0.1 percent in 2012, weaker than 0.6 percent estimated previously. However, it lifted the growth forecast for 2013 to 1.9 percent from previously forecast 1.8 percent.
The results of the referendum vote in Ireland came in on Friday. Voters convincingly approved a European treaty aimed at enforcing stricter fiscal discipline. The final results showed that 60.3 percent of voters voted "Yes" while 39.7 percent voted "No."
The Euro Stoxx 50 index of eurozone bluechip stock declined by 2.22 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 1.44 percent.
The DAX of Germany dropped by 3.42 percent and the CAC 40 of France finished lower by 2.21 percent. The FTSE 100 of the U.K. decreased by 1.14 percent and the SMI of Switzerland closed down by 1.24 percent.
In Frankfurt, MunichRe fell by 2.16 percent. UBS upgraded its rating on the stock to "Buy" from "Neutral."
Deutsche Bank decreased by 3.94 percent and Commerzbank lost 1.65 percent.
Daimler dropped by 4.97 percent, BMW lost 3.75 percent and Volkswagen finished down by 4.14 percent.
Clothing and footwear firm Gerry Weber declined by 5.89 percent after Equinet initiated the stock with an "Accumulate" rating.
Gagfa finished lower by 3.37 percent. JPMorgan downgraded the stock to "Underweight" from "Neutral."
Axel Springer dropped by 1.70 percent. The stock was downgraded to "Neutral" from "Underweight" at JPMorgan.
In Paris, Societe Generale declined by 0.59 percent and Credit Agricole fell by 0.35 percent.
Peugeot decreased by 1.86 percent and Renault fell by 0.04 percent.
In London, BP gained 1.80 percent. The oil giant intends to sell its shareholding in Russian joint venture TNK-BP Ltd., as it has received "unsolicited indications" from interested parties.
Miners turned in a weak performance, due to the weaker than expected manufacturing data from China. Antofagasta dropped by 1.10 percent and Rio Tinto finished lower by 0.31 percent. Evraz lost 4.84 percent and Vedanta Resources closed down by 4.90 percent.
HMV Group increased by 17.35 percent, after the company announced the sale of London concert venue Hammersmith Apollo.
Smith & Nephew fell by 2.56 percent. The company voluntarily withdrew a component used in hip implants, due to dissatisfaction with clinical results.
ITV finished down by 4.73 percent, after Investec Securities downgraded the stock to "Sell" from "Hold."
Eurozone unemployment reached a record high in April as companies reduced headcount to limit costs amid fears of recession. The jobless rate came in at 11 percent in April, the same rate as seen in March, Eurostat said Friday. It also matched economists' expectations. The rate for March was originally reported as 10.9 percent.
Eurozone manufacturing activity deteriorated at the strongest pace in nearly three years in May, detailed results of a survey conducted by Markit Economics showed Friday. The seasonally adjusted purchasing managers' index, a performance indicator for the manufacturing sector, fell to 45.1 in May from 45.9 in April. This was marginally above the flash estimate of 45.
Activity in the Germany manufacturing sector deteriorated at the sharpest pace in nearly three years in May, final data from a survey by Markit Economics and BME showed Friday. The seasonally adjusted purchasing managers' index (PMI) for the manufacturing sector came in at 45.2 in May, slightly higher than 45 recorded in the flash estimates. In April, the reading was 46.2.
The British manufacturing sector contracted for the first time in six months in May, as companies scaled back production and employment as inflows of new business declined sharply, data from a survey by Markit Economics and the Chartered Institute of Purchasing and Supply (CIPS) showed Friday. The seasonally adjusted purchasing managers' index (PMI) for the manufacturing sector dropped to 45.9 in May from 50.2 in April, hitting the lowest level in three years.
China's official purchasing managers' index, an indicator of the performance of the manufacturing sector, declined in May, a report from the China Federation of Logistics and Purchasing (CFLP) showed Friday. The index fell to 50.4 in May from 53.3 in April. Economists had expected the reading to fall to 52.
Job growth in the U.S. came in at an anemic rate in May, sending the unemployment rate up slightly for the month, according to figures released Friday by the Labor Department. The economy added a net of just 69,000 new jobs in May, far lower than the 150,000 expected by most economists. Furthermore, the already week job creation numbers posted for April were revised down sharply to show a gain of just 77,000 jobs, 38,000 fewer than the 115,000 initially reported.
The report also showed that the unemployment rate ticked up to 8.2 percent in May from 8.1 percent in April, marking the first increase since last June. The increase by the unemployment rate surprised economists, who had expected the unemployment rate to come in unchanged.
Activity in the U.S. manufacturing sector continued to expand in the month of May, according to a report released by the Institute for Supply Management on Friday, although the pace of growth slowed by more than economists had anticipated.
The ISM said its purchasing managers' index fell to 53.5 in May from 54.8 in April, although a reading above 50 indicates continued growth in the manufacturing sector. Economists had been expecting the index to edge down to a reading of 54.0.
Private sector construction in the U.S. fueled a continued rebound in overall construction spending in April, according to figures released Friday by the Commerce Department. Total construction spending for the month came in at a seasonally adjusted annual rate of $820.7 billion in April, reflecting a 0.3 percent increase over revised March levels.
While the 0.3 percent growth rate was slightly slower than the 0.4 percent growth predicted by most economists, it comes atop revised figures that showed construction spending growing at 0.3 percent in March, upwardly revised from the 0.1 percent increase initially reported.
While the Commerce Department released a report on Friday showing that U.S. personal income rose by a little less than expected in the month of April, personal spending for the month still increased in line with estimates. The report showed that personal income edged up by 0.2 percent in April following a 0.4 percent increase in March. Economists had expected income to increase by about 0.3 percent.
Meanwhile, personal spending rose by 0.3 percent in April after climbing by 0.2 percent in March. The increase matched the expectations of economists.
by RTT Staff Writer
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