Markets across Europe finished to the downside on Thursday, due to concerns over the worldwide economic situation. Investors are nervous ahead of the release of the Chinese second quarter GDP result, due to the recent signs of weakness in the world's second largest economy. A surprise interest rate cut from South Korea overnight also heightened concerns.
The U.S. FOMC minutes released late Wednesday from the June meeting disappointed many investors. Many had hoped that a third round of quantitative easing was on the horizon, but only a few central bank officials thought that further asset purchases would be necessary.
The risks surrounding the economic outlook for the euro area continue to be on the downside, the European Central Bank said in its monthly bulletin published on Thursday. Downside risks relate to a renewed increase in the tensions in several euro area financial markets and their potential spillover to the euro area real economy. Another risk is increase in energy prices over the medium term.
The amount of overnight cash deposits of financial institutions at the European Central Bank more than halved after the bank cut the overnight deposit rates to zero last week. As funds parked at the ECB now earn no interest, banks are likely to raise lending and thereby support economic activity.
Italy's cost of borrowing for one-year funds declined sharply at a debt auction on Thursday, indicating that investor sentiment improved after the latest EU summit and the announcement of Spain's new austerity package.
The Italian Treasury raised the targeted EUR 7.5 billion from the sale of its 12-month bills or BoTs. The auction attracted bids totaling EUR 11.595 billion. The yield on the one-year paper fell significantly to 2.697 percent from 3.972 percent in the previous sale on June 13.
The Office for Budget Responsibility on Thursday said the U.K. fiscal position is unsustainable if the government absorbs national income simply to pay the interest on its debt. Ageing population is adding upward pressure on public spending, it said. According to OBR calculation, expenditure will rise to 40.8 percent of GDP by 2061-62, an increase of 5.2 percent of GDP in today's term.
The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.71 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.95 percent.
The DAX of Germany fell by 0.53 percent and the CAC 40 of France finished lower by 0.70 percent. The FTSE 100 of the U.K. dropped by 0.89 percent and the SMI of Switzerland decreased by 0.44 percent.
In Frankfurt, Deutsche Boerse fell by 1.91 percent. UBS removed the stock from its 'Most Preferred List.'
Symrise dipped by 0.14 percent. HSBC downgraded its rating the stock to 'Underweight' from 'Neutral.'
Suedzucker increased by 3.59 percent, after reporting a higher first-quarter profit.
In Paris, Loreal declined by 1.35 percent. ING downgraded its rating on the stock to "Sell" from "Hold."
Carrefour said its second-quarter sales dropped from a year ago driven by weakness in France and other parts of Europe. However, the grocer saw sustained growth in emerging markets. The stock rose by 6.97 percent.
Capgemini dropped by 2.85 percent, after Credit Suisse initiated coverage on the stock with an "Underperform" rating.
Peugeot fell by 1.74 percent. The carmaker announced a project to reorganize its French production base and redeploy its workforce, but said it would report a loss for the first half of the year amid contraction in European demand and overcapacity in the group. The measures include reduction of 3,600 jobs across all of its facilities in France.
In London, miners were under pressure ahead of the release of Chinese GDP data. Anglo American lost 2.21 percent and Antofagasta declined by 3.97 percent. Rio Tinto dropped by 3.53 percent.
Ashmore Group sank by 6.73 percent. The company said assets under management for the June quarter were down 3.3 percent.
BHP Billiton dropped by 3.31 percent, after Credit Suisse downgraded the stock to "Neutral" from "Outperform."
Vodafone Group lost 1.17 percent, after the company agreed to acquire TelstraClear Ltd. for 840 million New Zealand dollars.
Associated British Foods reported an 11 percent increase in revenues for the 40 weeks ended June 23 and said it remains on track to deliver substantial growth in adjusted operating profit and earnings per share for the full year. The stock finished up by 0.71 percent.
Shares of Aegis Group surged by 45.07 percent after the advertising holding company agreed to be bought out by Japanese advertising firm Dentsu Inc. for 3.16 billion pounds in cash.
Fashion retailer SuperGroup reported a 32 percent growth in revenue despite operational challenges. The stock increased by 15.10 percent.
Production in Eurozone's industrial sector bounced back unexpectedly in May, but the sector is unlikely to sustain the gains given the sluggish economic activity in the single-currency bloc owing to the debt crisis. Industrial production rose 0.6 percent month-on-month in May, following a 1.1 percent decrease in April. The outcome was better than economists' expectations for a flat reading.
Wholesale price inflation in Germany eased to 1.1 percent in June from 1.7 percent in May, the Federal Statistical Office said Thursday.
French annual inflation remained unchanged in June, data from the statistical office Insee showed Thursday. Inflation, as measured by the harmonized index of consumer prices, rose 2.3 percent year-on-year in June, the same rate as seen in May. Economists were forecasting the rate to slow to 2.2 percent.
With fuel prices showing a substantial decrease in the month of June, the Labor Department released a report on Thursday showing a much bigger than expected drop in import prices for the month. The report showed that import prices tumbled by 2.7 percent in June following a revised 1.2 percent drop in May. Economists had expected prices to fall by 1.9 percent compared to the 1.0 percent decrease originally reported for the previous month.
Export prices also showed a notable decrease, falling by 1.7 percent in June after sliding by 0.4 percent in May. The drop far exceeded economist estimates for a decrease of about 0.2 percent.
First time claims for U.S. unemployment benefits unexpectedly showed a notable decrease in the week ended July 7th, according to a report released by the Labor Department on Thursday, although the drop was partly due to seasonal distortions.
The report showed that jobless claims fell to 350,000 from the previous week's revised figure of 376,000. The drop surprised economists, who had expected jobless claims to edge up to 375,000 from the 374,000 originally reported for the previous week.
by RTT Staff Writer
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