The European markets finished in the green on Friday, after growth concerns were eased by the release of China's second quarter GDP result overnight. Mining and energy stocks rallied higher on the news. The markets were largely able to shrug off a downgrade of Italy's credit rating by Moody's. The positive opening and early gains posted by the U.S. stock markets helped the European markets to extend their gains in the afternoon. The unexpected increase in the U.S. producer price index was also viewed positively.
China's economic growth eased to a three-year low of 7.6 percent year-on-year in the second quarter, fresh figures from the National Bureau of Statistics showed Friday. In the first quarter, the gross domestic product was up 8.1 percent year-on-year. The outcome was almost in line with economists' expectations of 7.7 percent expansion.
Moody's Investors Service on Friday downgraded Italy's credit rating by two notches, citing contagion risk from Greece and Spain, higher funding costs and a deteriorating economic outlook. Italy's government bond rating was cut to Baa2 from A3. The agency maintained the 'negative' outlook on the rating, citing "substantial" risks to implementing the planned fiscal reforms.
"Italy is more likely to experience a further sharp increase in its funding costs or the loss of market access than at the time of our rating action five months ago due to increasingly fragile market confidence, contagion risk emanating from Greece and Spain and signs of an eroding non-domestic investor base," Moody's said in a statement.
Italy saw its three-year borrowing costs decline at a debt auction on Friday, just hours after Moody's downgraded the country's rating citing contagion risk. Falling yields at the auction indicate that investors shrugged off Moody's warning and retained the optimism derived from the latest EU summit and Spain's efforts to meet its deficit goals.
Spain's banks increased their borrowings from the European Central Bank in June, the Bank of Spain said Friday. Gross borrowings of banks rose to EUR 365 billion from EUR 324.6 billion in May.
There is nothing to prevent the European Central Bank from cutting interest rate below 0.75 percent, ECB policymaker Klaas Knot said in an interview to Financial Times Deutschland. Knot, who heads the Dutch central bank, told the daily "should the situation worsen, there is no article of faith that would prevent us from going below 0.75 percent."
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 1.11 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 1.04 percent.
The DAX of Germany climbed by 2.15 percent and the CAC 40 of France gained 1.46 percent. The FTSE 100 of the U.K. rose by 1.03 percent and the SMI of Switzerland finished up by 0.56 percent.
In Frankfurt, Deutsche Telekom gained 5.40 percent. Credit Suisse upgraded the stock to "Neutral" from "Underperform."
Volkswagen rose by 2.13 percent. The carmaker reported an 8.9 percent growth in vehicle deliveries for the first half of 2012, but added that the second half would be altogether more challenging. BMW climbed by 3.17 percent and Daimler added 2.90 percent.
Delticom increased by 4.17 percent, after HSBC upgraded the stock.
In Paris, France Telecom climbed by 5.56 percent. Deutsche Bank upgraded the stock to "Hold" from "Sell."
Exane BNP upgraded Vivendi to "Neutral" from "Underperform." The stock is increased by 3.51 percent.
Carrefour was upgraded to "Neutral" from "Sell" at Citigroup. The shares finished up by 3.01 percent.
Mailroom equipment firm Neopost gained 4.75 percent. The company announced the acquisition of GMC Software Technology.
Peugeot plunged by 7.65 percent, but Renault closed up by 0.08 percent.
In London, miners are mostly higher. Antofagasta climbed by 2.98 percent and BHP Billiton gained 3.03 percent. Rio Tinto rose by 3.21 percent and Polymetal International advanced by 6.70 percent.
Energy stocks were also among the positive performers on Friday. Shares of BP climbed by 0.69 percent and BG Group gained 1.25 percent. Royal Dutch Shell finished the session higher by 0.09 percent.
Experian dropped by 2.00 percent. The firm reported higher revenue for the first quarter, but said it is aware of tougher conditions in some markets, especially in the Eurozone.
SSE decreased by 0.85 percent, after Citigroup downgraded its rating on the stock to "Sell" from "Neutral."
Sika fell by 4.07 percent in Zurich, after the stock was reportedly downgraded.
The U.K. leading index declined in May due to the weakness in stock prices and business sentiment, the Conference Board said in a report on Friday. The leading index fell 0.8 percent in May, following a 0.2 percent rise in April. Only two of the seven components made positive contributions to the index.
Retail business activity in France rebounded in June as sales of food products improved after lackluster performance in the first two months of the second quarter, a survey by Bank of France showed Friday. Retail activity grew 4.3 percent month-on-month in June on a seasonally and working-day adjusted basis. On a quarter-on-quarter basis, sales declined 1 percent in the June quarter.
Producer prices in the U.S. unexpectedly showed a modest increase in the month of June, according to a report released by the Labor Department on Friday, with prices rebounding slightly after showing a sharp drop in the previous month.
The Labor Department said its producer price index edged up by 0.1 percent in June after tumbling by 1.0 percent in May. The modest increase surprised economists, who had expected prices to see further downside and fall by about 0.4 percent.
Consumer sentiment in the U.S. has unexpectedly seen a continued deterioration in the month of July, according to a report released by Thomson Reuters and the University of Michigan on Friday. The report showed that the consumer sentiment index fell to 72.0 in July from the final June reading of 73.2. Economists had been expecting the index to edge up to 73.5.
by RTT Staff Writer
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