The majority of the European markets finished to the upside on Tuesday. Bank stocks were among the best performers, on the news that the Group of Seven held an emergency meeting to discuss the European debt crisis. The better than expected U.S. non-manufacturing report also provided support in afternoon trading.
Investors will be watching for the results of the European Central Bank meeting, which will take place on Wednesday. Also, U.S. Federal Reserve Chairman Ben Bernanke is scheduled to testify before the Joint Economic Committee Thursday morning.
Finance ministers and central bank governors from the Group of Seven Industrialized nations held an emergency meeting on Tuesday to discuss the worsening economic situation in the Eurozone. The G7 meeting today will be followed by a summit of leaders from the Group of 20 nations in Mexico on June 18-19.
Japanese Finance Minister Jun Azumi stated during a teleconference that the G7 has agreed to cooperate to deal with the troubling situation in the Eurozone, namely in Greece and Spain. The possibility of a Greek exit from the Eurozone was not discussed at the emergency meeting.
Eurozone should develop a "proper fiscal union" ahead of any common debt management, German Finance Minister Wolfgang Schaeuble said in a newspaper interview. "The government has always said that before we can talk about common debt management, we need a proper fiscal union," Schaeuble told the business daily Handelsblatt. A fiscal union is a medium-term project, he said.
Eurozone banks should be allowed to tap funds directly from the region's bailout facilities, European Central Bank Executive Board Member Benoit Coeure has said. "Banks that need recapitalization must also be allowed to directly access the European Financial Stability Facility (EFSF) and, when it is in place, the European Stability Mechanism (ESM)," Coeure said.
However, letting euro area banks access the rescue funds should not be a way for governments to escape their responsibilities and to rid themselves of the cost of past errors, he cautioned.
Standard & Poor's on Monday said it believes there is at least one-in-three chance of Greece exiting the Eurozone in the coming months, following this month's national elections. However, S&P said the likelihood of other euro members leaving Eurozone, in the wake of a Greek exit, is very remote.
Spain has lost capital markets access due to steep risk premiums, Budget Minister Cristobal Montoro in a radio interview on Tuesday. "What this premium tells us is that the State, and Spain as a whole, has a problem when it comes to access markets, when we need to refinance our debt," he told Spanish broadcaster Onda Cero.
The Euro Stoxx 50 index of eurozone bluechip stocks rose by 0.38 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, closed up by 0.23 percent.
The CAC 40 of France climbed by 1.07 percent and the SMI of Switzerland increased by 0.02 percent. The DAX of Germany finished down by 0.15 percent, but the FTSE 100 of the U.K. remained closed for the Queen's Diamond Jubilee celebration.
In Frankfurt, Deutsche Post fell by 0.16 percent. The company will make a one-time payment of 516 million euros in the third quarter as additional value added tax.
Retailer Fielmann rose by 0.65 percent. Commerzbank upgraded its rating on the stock to "Hold" from "Reduce."
Deutsche Bank lowered its rating on HHLA to "Hold" from "Buy." The logistics firm finished up by 0.17 percent.
Commerzbank increased by 1.62 percent and Deutsche Bank gained 0.15 percent.
In Paris, France Telecom declined by 0.19 percent. The company is reportedly cutting its dividend.
Media group Lagardere increased its offer to purchase LeGuide.com to 28 euros per share from 24 euros per share. The stock finished higher by 1.36 percent.
Societe Generale rose by 4.02 percent, Credit Agricole added 3.00 percent and BNP Paribas climbed by 2.37 percent.
Swiss baker Aryzta said revenue climbed nearly 15 percent in the third quarter, helped by acquisitions, despite a challenging Europe. The company also confirmed its full year earnings outlook. The stock closed lower by 1.73 percent.
Retail sales in Eurozone declined more than expected in April as record-high unemployment and recession fears kept consumers away from discretionary spending. Data released by Eurostat showed Tuesday that retail sales in the 17-nation currency bloc fell 1 percent month-on-month in April, faster than the 0.1 drop forecast by economists. Also, this reversed a 0.3 percent gain in March.
The Eurozone private sector shrank less than initially estimated in May, but the decline was the biggest since June 2009, Markit Economics said Tuesday. The composite output index dropped to 46 from 46.7 in April. The reading was slightly above the flash reading of 45.9.
German industrial orders declined in April due to a sharp deterioration in foreign demand, official data showed Tuesday. Factory orders declined 1.9 percent in April from a month ago, when it grew 3.2 percent, data from the Federal Ministry of Economy and Technology revealed. The rate of decline exceeded the 1.1 percent drop forecast by economists.
Germany's service sector expanded slightly less than initially estimated in May, which marked the slowest growth in six months, final data released by Markit Economics and HSBC Bank showed Tuesday. The seasonally adjusted purchasing managers' index (PMI) for the service sector came in at 51.8 in May, lower than 52.2 recorded in the flash estimates, which was in line with the reading for April.
China's service sector grew at the strongest pace in 19 months in May, offsetting the weakness in the manufacturing sector, a survey by Markit Economics revealed Tuesday. The HSBC Business Activity Index, an indicator of the service sector performance, was at 54.7 in May compared to 54.1 in April. The latest reading was the highest in 19 months.
Activity in the U.S. service sector grew at a slightly faster rate in the month of May, according to a report released by the Institute for Supply Management on Tuesday, with the modest acceleration coming as a surprise to economists.
The ISM said its non-manufacturing index crept up to 53.7 in May from 53.5 in April, with a reading above 50 indicating growth in the service sector. Economists had expected the index to come in unchanged compared to the previous month.
by RTT Staff Writer
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