The European markets closed to the upside on Tuesday, but concerns over the debt crisis in the Eurozone continued to weigh on sentiment. The markets struggled to hold on to gains on Monday, following the announcement that Spain had secured EUR 100 billion in assistance from the Eurozone over the weekend, to help its struggling banking sector.
Bond yields increased sharply in Italy on Tuesday and the yield on a 10-year Spanish government bond surged to around 6.8 percent. Banking stocks were under pressure during the trading session. However, defensive stocks were in high demand, while shares of miners were also a source of strength.
Making the firewalls higher and higher will not resolve the crisis, Bundesbank Board member Andreas Dombret said Tuesday. A firewall cannot extinguish a fire. It only buys time until sustainable measures become effective, Dombret said in a speech at the Bank of America Merrill Lynch Global Macro Conference.
It is definitely not the task of the euro system to substitute for national fiscal policies, central banker said. Greece should stick to the agreed austerity and structural reform measures. "There is no basis for external aid without the agreed reform program," he added.
The European Central Bank as well as the 17 national central banks in the currency bloc should be empowered to monitor and supervise banks with cross-border presence, Governing Council member Christian Noyer wrote in an op-ed published in the Wall Street Journal Tuesday.
European Commission President Jose Manuel Barroso has urged all the 27 European Union members to consider a single cross-border supervisor for their banks in order to form a banking union, which could be enacted as early as next year.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.26 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 1.06 percent.
The DAX of Germany rose by 0.33 percent and the CAC 40 of France gained 0.14 percent. The FTSE 100 of the U.K. gained 0.76 percent and the SMI of Switzerland climbed by 0.83 percent.
In Frankfurt, E.ON rose by 2.16 percent. UBS upgraded its rating on the stock to "Buy" from "Neutral."
Societe Generale upgraded Deutsche Bank to "Buy" from "Hold." The stock finished lower by 0.90 percent. Commerzbank ended the session lower by 1.39 percent.
In Paris, Lafarge climbed by 2.07 percent. The cement giant unveiled plans aimed at driving growth in sales, cash generation and return on capital through 2015, including cost savings of 1.30 billion euros and EBITDA improvement of at least 450 million euros.
Credit Agricole fell by 2.80 percent and Societe General declined by 0.94 percent.
Air France-KLM closed down by 1.86 percent. HSBC initiated the stock with an "Overweight" rating.
Rémy Cointreau said full year profit climbed 57 percent, driven by strong demand for cognacs in Asia as well as sales growth in all other regions. The stock finished higher by 0.09 percent.
In London, RPC Group dropped by 7.96 percent. The rigid plastic packaging supplier said its outlook for the short term is "contending with a difficult and uncertain macro-economic environment."
GlaxoSmithKline gained 0.83 percent. The company announced that its subsidiary, Stiefel, agreed to purchase prescription drug Toctinto from Basilea Pharmaceutica.
Amlin PLC climbed by 0.99 percent, after Deutsche Bank upgraded the stock to "Buy" from "Hold."
easyJet was downgraded to "Neutral" from "Overweight" at HSBC. The stock declined by 2.18 percent.
BHP Billiton increased by 1.50 percent and Anglo American gained 1.28 percent. Rio Tinto climbed by 1.02 percent and Fresnillo finished higher by 2.36 percent.
British American Tobacco rose by 1.45 percent and Imperial Tobacco Group added 1.18 percent.
Credit Suisse fell by 0.91 percent in Zurich. Societe Generale downgraded the stock to "Sell" from "Hold."
Julius Baer rose by 2.65 percent, after UBS upgraded the stock to "Buy" from "Neutral."
Holcim lost 0.69 percent, after stating that it is on track to achieve sustainability targets.
U.K. manufacturing output dropped more-than-expected at the start of the second quarter, lifting chances of the economy going into a longer recession. Manufacturing output dipped 0.7 percent month-on-month in April, reversing March's 0.9 percent rise, the Office for National Statistics said Tuesday. The latest decline far exceeded economists' forecast of 0.1 percent fall.
France's non-farm payroll employment rose modestly in the first three months of the year, final data released by the statistical office INSEE confirmed Tuesday. Payroll employment in the principally market sectors, which includes manufacturing, construction and services, edged up 0.1 percent quarter-on-quarter, reversing a similar fall in the previous three months. The figure matched the preliminary estimate.
Spain's leading economic index decreased notably in April, data from a survey by the Conference Board showed Tuesday. The leading economic index decreased 1.6 percent on a monthly basis to 102.6 in April, after dipping a revised 0.9 percent in March. All of the six components of the leading index made negative contributions.
Driven by a steep drop in fuel prices, U.S. import prices fell sharply in May, according to figures released Tuesday by the Labor Department, while prices for U.S. exported goods fell for the first time in 2012. The overall price index for U.S. imports fell by 1 percent in May, marking the largest monthly drop since June of 2010. Most economists, however, had expected a somewhat bigger 1.1 percent decline in the costs of imported goods.
Export prices, which had increased by 2 percent over the first four months of the year, fell 0.4 percent in May, the first monthly decline of 2012. The drop surprised economists, who had expected an increase of 0.1 percent.
by RTT Staff Writer
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