The European markets have ended Thursday's session in negative territory. The markets got off to a weak start, due to disappointment over yesterday's announcement from the U.S. Federal Reserve. While the Fed did announce further stimulus, it refrained from a third round of quantitative easing, which many investors had been hoping for. Weak economic data from China and Europe further contributed to the negative mood of the markets.
The Federal Reserve voted Wednesday to extend a program designed to stimulate the economy for another six months. Under "Operation Twist," an effort to thaw credit markets and keep real interest rates low, the Fed will continue to sell billions in short-term bonds and use the funds to buy longer-term securities through 2012. The program had originally been slated to end this month.
The Fed cited slow economic growth in recent months for its continued action to support the U.S. economy and noted that it remains prepared to take further action if necessary. The Fed also decided to keep its benchmark target interest rate effectively at zero and reiterated that "exceptionally low" interest rates are likely warranted through at least late 2014.
China's manufacturing sector performance continued to worsen with the factory activity entering an eighth month of contraction in June amid falling export orders, a key survey revealed Thursday. Markit Economics said that the flash HSBC purchasing managers' index for the manufacturing sector fell to a seven-month low of 48.1 in June from 48.4 in May.
Spain's borrowing costs climbed again at a debt auction on Thursday despite rising demand, as the government is set to release crucial bank stress test results later and, thereafter, make a formal request for financial aid to the Eurogroup.
The Spanish Treasury raised a total EUR 2.2 billion from the sale of its 2-, 3- and 5-year bonds. The proceeds slightly exceeded the maximum target of EUR 2 billion set for the auction. The country placed EUR 700 million of its 3.40 percent April 2014 bond to yield 4.706 percent, more than double the 2.069 percent paid in the previous sale on March 1.
Eurozone's rescue fund is big enough to ease temporary tensions on the secondary markets, European Central Bank Executive Board Member Benoit Coeure said in an interview to the Financial Times. The policy maker said the European Financial Stability Facility (EFSF) was allowed to undertake secondary market interventions almost a year ago but the "governments have not yet chosen to use that possibility."
The Euro Stoxx 50 index of eurozone bluechip stocks decreased by 0.23 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, dropped by 0.32 percent.
The DAX of Germany fell by 0.77 percent and the CAC 40 of France lost 0.39 percent. The FTSE of the U.K. declined by 0.99 percent and the SMI of Switzerland finished lower by 0.10 percent.
In Frankfurt, Volkswagen dropped by 3.10 percent. Daimler fell by 1.36 percent and BMW lost 0.93 percent.
Cewe Color fell by 1.79 percent. Deutsche Bank initiated the stock with a "Buy" rating.
Nordex gained 1.27 percent after UBS upgraded its rating on the stock to "Neutral" from "Sell."
In Paris, Lafarge increased by 1.24 percent after HSBC upgraded the stock to "Overweight" from "Neutral."
Commerzbank upgraded its rating on shares of EADS to "Buy" from "Hold." The stock finished up by 1.18 percent.
Air France-KLM climbed by 5.49 percent. The firm plans to a 5,120 reduction in headcount at Société Air France by December 2013.
In London, Invensys said it is no longer in discussions with Emerson Electric Co. regarding a possible offer for the company. The stock sank by 14.40 percent.
Ashtead increased by 1.76 percent, after boosting its profit forecast for the year.
Holcim was upgraded to "Overweight" from "Underweight" at HSBC. The shares gained 2.14 percent in Zurich.
Swiss Life rose by 1.99 percent, after Deutsche Bank upgraded the stock to "Buy" from "Hold."
Eurozone consumer confidence decline less-than-expected in June, after a modest rebound in the previous month, preliminary data released by the European Commission revealed Thursday. The flash consumer confidence indicator dropped to -19.6 from May's -19.3. Economists had forecast a figure of -20.
Eurozone private sector output shrank at the steepest pace in three years in June, a survey by Markit Economics showed Thursday. The flash Eurozone Composite Output Index remained at 46, unchanged from May's 35-month low. Economists expected a decline to 45.5.
The Eurozone current account surplus declined to a seasonally adjusted EUR 4.6 billion in April from EUR 10.3 billion a month ago, the European Central Bank said in a report on Thursday. The surplus on trade in goods decreased to EUR 7.5 billion from EUR 8.7 billion. Likewise, the surplus in services fell to EUR 5.9 billion from EUR 7.4 billion in March.
Germany suffered the steepest contraction in manufacturing activity in three years in June amid a faster decline in new export orders, a survey by Markit Economics showed Thursday. The manufacturing purchasing managers' index fell to 44.7 in June from 45.2 in May. This was the weakest reading in 36 months.
Activity in the French manufacturing sector decreased at a slower rate in June, data from a survey by Markit Economics and HSBC Bank showed Thursday. The seasonally adjusted purchasing managers; index (PMI) for the manufacturing sector came in at a two-month high of 45.3 in June, up from 44.7 recorded in May. Economists were looking for a reading of 44.5.
U.K. retail sales recovered at a faster than expected pace in May due to discounting and store sales promotion. Retail sales volume including automotive fuel rose 1.4 percent from the previous month, when it was down 2.4 percent, the Office for National Statistics said Thursday. Economists had forecast just 1.2 percent rise after bad weather dampened April sales.
First-time claims for U.S. unemployment benefits showed a modest decrease in the week ended June 16th, according to Labor Department figures released Thursday, although claims still came in higher than economists had expected.
The Labor Department of estimated that new unemployment claims came in at a seasonally adjusted level of 387,000 for the week, a decrease of 2,000 from the previous week's revised level of 389,000. Economists had been expecting jobless claims to dip to 383,000 from the 386,000 originally reported for the previous week.
Citing supply constraints rather than softening demand, the National Association of Realtors released a report Thursday morning showing a slightly bigger than expected drop in U.S. existing home sales in the month of May.
NAR said existing home sales fell by 1.5 percent to a seasonally adjusted annual rate of 4.55 million in May from 4.62 million in April. Economists had expected a slightly more modest decrease to an annual rate of 4.57 million.
The Philly Fed said its diffusion index of current activity fell to a negative 16.6 in June from a negative 5.8 in May, with a negative reading indicating a contraction in regional manufacturing activity. Economists had expected the index to rebound to a positive 0.5.
Reversing a slight decline in April, the Conference Board's index of leading U.S. economic indicators showed an unexpected increased in the month of May. The Conference Board released a report Thursday showing that its leading economic index rose by 0.3 percent in May after edging down by 0.1 percent in April. Economists had expected the index to come in unchanged.
by RTT Staff Writer
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