The majority of the European markets closed in negative territory on Friday. A Spanish downgrade by ratings agency Fitch and the week German trade report put pressure on the markets. Financial stocks were weak Friday, due to the Spanish downgrade. U.S. Federal Reserve Chairman Ben Bernanke's testimony before the Joint Economic Committee also continued to have an impact on sentiment. The markets trimmed their losses heading into the close, on reports that Spain will request aid from Europe this weekend.
Fitch Ratings announced Thursday that it downgraded Spain's Long-term foreign and local currency Issuer Default Ratings to 'BBB' from 'A'. The Outlook on the Long-term IDRs is Negative. Fitch said the downgrade of Spain's sovereign ratings by three notches reflects higher than expected fiscal cost of restructuring and recapitalizing the Spanish banking sector, which it now estimates to be around EUR60 billion or as high as EUR100 billion in a more severe stress scenario.
Bank of Spain Governor Miguel Fernandez Ordonez said Friday that the sovereign debt crisis and the economy's financing conditions have placed Spain in a position of extreme vulnerability. He said the prospects of a recovery from recession "are not immediate." Moreover, the prolonged cyclical weakness is preventing swifter headway in redressing public finances and in reducing private-sector debt, he said during the presentation of the annual report.
According to reports, Spain is likely to request aid from European countries, over the weekend, to shore up their troubled banks. Eurozone finance ministers would hold a conference call on Saturday to evaluate the situation and talk on support package. EU reportedly says that it has sufficient tools in case Spain comes up with aid request.
U.S. economic growth continues to proceed at a "moderate pace", but the Federal Reserve remains prepared to take action if financial stresses escalate, the nation's top central banker told lawmakers on Capitol Hill Thursday morning.
In prepared remarks before the Joint Economic Committee of Congress, Federal Reserve Chairman Ben Bernanke made no explicit reference to further easing measures despite an ongoing crisis in Europe and recent weakness in the labor market.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.01 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, finished lower by 0.35 percent.
The DAX of Germany fell by 0.22 percent and the CAC 40 of France closed down by 0.63 percent. The FTSE 100 of the U.K. dropped by 0.23 percent, but the SMI of Switzerland increased by 0.00 percent.
In Frankfurt, Volkswagen declined by 1.70 percent. UBS added Volkswagen to its 'Least Preferred List.' BMW fell by 1.38 percent and Daimler closed down by 0.59 percent.
Commerzbank decreased by 3.28 percent and Deutsche Bank finished lower by 0.75 percent.
Celesio increased by 5.55 percent after Cheuvreux upgraded its rating on the stock to "Outperform" from "Underperform."
In Paris, UBS added Renault to its "Most Preferred List." Renault fell by 2.34 percent and Peugeot decreased by 3.24 percent.
Societe Generale declined by 1.18 percent, Credit Agricole dropped by 0.10 percent and BNP Paribas closed down by 1.86 percent.
In London, Marks & Spencer fell by 1.56 percent. The clothing retailer said it would foray into banking business this summer with the launch of the first M&S Bank scheduled for next month.
Royal Bank of Scotland decreased by 0.62 percent, Barclays dropped by 1.30 percent and HSBC finished lower by 0.67 percent.
Anglo American declined by 2.77 percent and BHP Billiton lost 2.91 percent. Rio Tinto decreased by 4.84 percent and Antofagasta fell by 2.21 percent.
Lamprell sank by 22.26 percent, after revising its previous forecast.
German exports declined faster than expected in April as the deepening crisis in the euro area impacted demand from European countries, data from the Federal Statistical Office revealed. Signaling the weakening of domestic consumption, imports plunged at the fastest pace in two years.
The statistical office said that exports declined 1.7 percent month-on-month in April after adjusting to seasonal and calendar variations. This was the first decline in exports since December 2011. Economists expected only a 0.7 percent fall in shipments.
Imports also declined and the drop was steeper than that of exports. Imports fell 4.8 percent from a month earlier. This was the sharpest fall since April 2010. Economists were expecting a more modest 0.1 percent fall.
French business sentiment weakened for the second straight month in May, survey results from Bank of France showed Friday. The corresponding index came in at 93, in line with forecast, but down from the prior month's reading of 94.
The French trade deficit increased to EUR 5.8 billion in April from EUR 5.57 billion in March, data released by the Directorate General of Customs and Excise showed Friday. The deficit was larger than the expected shortfall of EUR 5.5 billion.
U.K. output price inflation fell to a two-and-a-half year low in May due to a sharp fall in oil prices, data from the Office for National Statistics showed Friday. Output price inflation slowed to 2.8 percent in May, the lowest since November 2009, from 3.2 percent in April. The annual rate was expected to stay at 3.2 percent.
U.S. imports and exports both fell in April, with a larger drop in imports leading to a narrowing of the U.S. trade deficit for the month. According to Commerce Department figures released Friday, the U.S. exported $182.9 billion worth of goods and services, while imports were tallied at $233 billion, resulting in a trade deficit of $50.1 billion. While the resulting trade deficit of $50.1 billion is narrower than the $52.6 billion recorded in March, it is still wider than the $49.3 billion deficit level predicted by most economists.
U.S. wholesale inventories increased by more than expected in April even as wholesale sales increased, according to figures released Friday by the Commerce Department. Total inventories of merchant wholesalers were recorded at a seasonally adjusted level of $483.5 billion at the end of April, a 0.6 percent increase from revised March levels, which were also up slightly from initial reports. Economists had expected wholesale inventories to increase by about 0.5 percent.
by RTT Staff Writer
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