Mario Draghi's comments regarding the Euro sparked a strong rally among the European markets on Thursday. Prior to the announcement, the markets had been bouncing back and forth between modest gains and losses after some mixed earnings reports. Shares of European banks rallied higher following the announcement and finished among the top performers of the session.
The European Central Bank President Mario Draghi on Thursday said the bank is prepared to take whatever measures needed to preserve the euro. "Within our mandate, the ECB is ready to do whatever it takes to preserve the euro," he told an investment conference in London. "And believe me, it will be enough."
The central bank chief's comments boosted markets and the euro. The Spanish 10-year yield dropped more than 30 points to around 6.82 percent, after climbing to a record 7.60 percent earlier in the week.
Credit rating agency Egan-Jones downgraded Italy further into 'junk' status amid deteriorating economic situation in Eurozone, reports said Wednesday. Italy's sovereign rating was lowered to CCC+ from B+. The company's previous downgrade of the sovereign was in June.
"Italy's independent ability to support its banks is questionable" given the current weak economic condition, Egan-Jones said.
Italy paid the highest cost in eight months to borrow funds for two years at an auction on Thursday as investors remain worried about the prospects of the economy along with those of Spain.
The Italian Treasury raised EUR 2.5 billion from the sale of its zero coupon bond or CTZ due May 2014 against a target of EUR 1.5 billion - EUR 2.5 billion. The auction attracted bids totaling EUR 4.442 billion. The yield rose to 4.860 percent, the highest since November, from 4.712 percent in the previous sale on June 26.
Moody's Investors Service on Wednesday said it is lowering the rating outlook on 17 German banking groups after cutting the outlook on Germany's sovereign rating earlier this week. The outlooks on the banks were lowered to 'negative.' The affected banks' ratings incorporate support from the German government and/or several German federal states or municipalities, Moody's said.
Portugal faces a significant risk of not meeting the deficit target this year due to weaker-than-expected economic growth, the Organization for Economic Co-operation and Development said in a report on Thursday.
The financial assistance program by the European Union and the International Monetary Fund is expected to remain on track, but there is a significant risk that fiscal targets are not met because growth undershoots expectations, the group said in the latest economic survey of Portugal.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 4.02 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 2.20 percent.
The DAX of Germany climbed by 2.75 percent and the CAC 40 of France gained 4.07 percent. The FTSE 100 of the U.K. rose by 1.28 percent and the SMI of Switzerland finished higher by 1.57 percent.
In Frankfurt, Volkswagen declined by 0.60 percent. The German auto giant reported slowing earnings growth.
Shares of Siemens dropped by 1.37 percent. The industrial conglomerate said the deteriorating environment has made it more difficult to achieve its full year earnings guidance, as its industrial short-cycle businesses continued to suffer from customer reluctance to spend. The company also had scrapped its initial public offering plan for the lighting unit Osram.
Commerzbank rose by 6.15 percent and Deutsche Bank gained 4.98 percent.
In Paris, France Telecom climbed by 5.89 percent, after it reported a smaller-than-estimated decline in revenue for the first half of 2012.
Peugeot dropped by 2.70 percent, after Moody's downgraded its rating on the stock.
Alcatel-Lucent fell by 5.94 percent. The telecom equipment maker announced plans to reduce global headcount by about 5,000 after posting a loss for the second quarter.
Societe Generale climbed by 8.41 percent, BNP Paribas gained 8.43 percent and Credit Agricole finished higher by 8.05 percent.
In London, Lloyds Banking Group finished down by 0.53 percent. The company posted a narrower first-half statutory loss attributable to equity shareholders of 641 million pounds compared with last year's loss of 2.28 billion pounds.
Barclays increased by 2.03 percent and Standard Chartered gained 1.73 percent. HSBC climbed by 1.56 percent and Royal Bank of Scotland closed up by 2.21 percent.
Royal Dutch Shell dropped by 2.26 percent, on dismal earnings.
Unilever Plc increased by 5.47 percent, after the company posted first-half pre-tax profit of 3.27 billion euros versus 3.23 billion euros last year.
Rolls-Royce Holdings gained 6.69 percent, after the company reported a higher profit for the first half of the year.
Shares of ITV PLC rose by 6.30 percent, after the company reported results for the first half of the year.
Sentiment among German households is set to improve slightly in August with high incomes boosting consumers' willingness to spend on big-ticket items, despite the growing tensions surrounding the prospects of Eurozone's economy. Market research group GfK said its consumer confidence index for August rose to 5.9 from 5.8 in July. Economists had expected the index to hold steady at the July level.
Germany's import price inflation slowed to 1.3 percent annually in June from 2.2 percent in May, Destatis reported Thursday. Economists were forecasting the annual rate to ease to 1.9 percent.
Eurozone's broad monetary aggregate M3 grew at a faster pace of 3.2 percent in June from the previous year, the European Central Bank said Thursday. The growth was forecast to slow to 2.9 percent from 3.1 percent in May.
Unemployment in France increased further in June, data from the Labor Ministry showed late Wednesday. The number of registered job seekers in mainland France rose by 23,700 or 0.8 percent from last month to 2.946 million in June.
Fueled by a significant increase in orders for transportation equipment, U.S. durable goods orders increased by much more than expected in June. According to figures released Thursday by the Commerce Department, overall new orders for durable goods came in at $221.6 billion in June, a 1.6 percent increase from May levels.
The increase, which far exceeded economist estimates for 0.6 percent growth, came atop revised figures that showed a 1.6 percent increase in durable goods orders in May, stronger than the 1.1 percent increase initially reported.
First-time claims for U.S. unemployment benefits fell by much more than expected in the week ended July 21st, according to a report released by the Labor Department on Thursday, with claims pulling back near the four-year low set earlier this month.
The Labor Department said initial jobless claims tumbled to 353,000 from the previous week's revised figure of 388,000. Economists had expected jobless claims to edge down to 380,000 from the 386,000 originally reported for the previous week.
Pending home sales in the U.S. unexpectedly showed a notable decrease in the month of June, according to a report released by the National Association of Realtors on Thursday. NAR said its pending home sales index fell by 1.4 percent to 99.3 in June after jumping 5.4 percent to a downwardly revised 100.7 in May. The drop came as a surprise to economists, who had expected pending home sales to increase by 0.9 percent.
by RTT Staff Writer
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