The European markets gave back their early gains on Monday and finished in negative territory. Investors fled to safe havens ahead of a summit of Eurozone finance ministers later today, in Brussels. Data from China overnight showed that consumer price inflation slowed to 2.2 percent in June, from 3 percent in May. The news from China weighed on energy stocks and miners, as well as retailers and luxury goods companies.
The meeting of Eurozone finance ministers is of special significance to Spain and Italy as finance ministers are set to discuss further the measures agreed by the EU leaders on June 29 that includes relaxed bailout rules, steps for more integration, and permitting the Eurozone rescue funds to directly re-capitalize banks.
Surging borrowing costs indicate that markets remain doubtful over the prospects of the currency bloc even after EU leaders struck a crucial deal last week. Further, it also suggested that the European Central Bank's move to cut interest rate to a record low did little to improve market sentiment.
Spain's 10-year benchmark yield rose to above 7 percent, a level seen unsustainable. Previously, Ireland, Greece and Portugal were forced to seek bailouts after borrowing costs crossed this threshold.
Similarly, Italy's 10-year bond yield climbed to 6.13 percent. The pressure was more on the shorter-dated paper. Spanish and Italian two-year yields climbed nearly 20 and 30 points, respectively.
The French economy is likely to have shrunk 0.1 percent in the second quarter of 2012 after zero growth in the first three months of the year, the latest estimate from the Bank of France showed Monday.
The central bank's survey of manufacturers and service providers showed that industrial activity will remain more or less stable in the short-term, while forecasts for services indicated uncertainty as to the level of activity in the coming months.
The Euro Stoxx 50 index of eurozone bluechip stock dipped by 0.20 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.34 percent.
The FTSE 100 of the U.K. fell by 0.62 percent and the SMI of Switzerland declined by 0.37 percent. The CAC 40 of France decreased by 0.38 percent and the DAX of Germany finished lower by 0.35 percent.
In Frankfurt, Metro declined by 6.33 percent after a report quoting CEO Olaf Koch said controlled spending would have a significant impact on business.
ProSiebenSat.1 fell by 3.0 percent. Citigroup downgraded its rating on the stock to "Neutral" from "Buy."
Nomura raised the European telecom sector to "Neutral" from "Underweight." Deutsche Telekom closed with a gain of 0.71 percent.
Gea finished higher by 0.82 percent. Barclays upgraded the stock to "Overweight" from "Underweight."
In Paris, EADS climbed by 1.59 percent amid the Farnborough Air Show.
Shares of LVMH fell by 1.70 percent and Carrefour closed down by 3.29 percent.
In London, Michael Page dropped by 3.76 percent. The company reported a lower profit in the second quarter and foresees a challenging third quarter.
JJB Sports plunged by 26.40 percent, after the sports retailer said its 22-week like-for-like sales decreased 8 percent.
BP fell by 1.04 percent, Royal Dutch Shell declined by 1.78 percent and BG Group finished lower by 1.02 percent.
Anglo American decreased by 2.90 percent, Vedanta Resources fell by 1.86 percent and Xstrata lost 2.21 percent.
Burberry Group fell by 2.72 percent.
Investor sentiment in Eurozone fell to the lowest level in three years in July, data released by think tank Sentix showed Monday. The sentiment index fell to -29.6 in July from -28.9 in June. The latest score was the lowest since July 2009. Economists were looking for an improvement to -25.
Business confidence in France weakened for the third consecutive month in June, data released by Bank of France showed Monday. The business confidence index for the industrial sector dropped to 91 in June from 92 in May, which was down from April's reading of 94. Economists expected the index to remain unchanged in June.
Germany's external trade rebounded markedly in May with exports growing significantly faster than forecast, mainly supported by demand from countries outside the European Union. The Federal Statistical Office (Destatis) said Monday that exports grew 3.9 percent month-on-month in May, reversing a 1.7 percent decline in April. Economists had expected only a 0.2 percent rise in shipments.
Imports also recovered strongly reflecting improved domestic demand. Arrivals climbed 6.3 percent on a monthly basis compared to expectations for a 0.8 percent rise.
The trade surplus rose to EUR 15.3 billion in May from a revised EUR 14.5 billion surplus in April. Economists were looking for a smaller surplus of EUR 14.1 billion.
by RTT Staff Writer
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