The majority of the European markets closed slightly lower on Wednesday, putting a halt to their recent streak of gains. A downgrade of the Greek credit rating by S&P had a negative impact on investor sentiment. Some mixed earnings results across Europe and profit taking after recent gains also factored into the markets' negative performance.
Standard and Poor's downgraded the credit rating outlook on Greece to 'negative' and said worsening economic activity would make it difficult for the government to make further spending cuts, which is crucial to secure the next disbursement under the international bailout program.
The outlook on the country's long-term sovereign credit rating was revised to 'negative' from 'stable', while the 'CCC/C' long- and short-term foreign and local currency sovereign credit ratings remained intact.
Fitch Ratings affirmed Germany's triple-A credit rating on Wednesday with stable outlook, citing the longstanding credit strengths and robust economic performance of the country over the past two years.
However, the biggest Eurozone economy remains exposed to the systemic component of the crisis, Fitch said. A significantly deeper recession of its large eurozone trading partners could also push Germany into recession with negative repercussions for the fiscal stance, it warned.
The Bank of England cut U.K.'s growth estimate as fiscal consolidation and Eurozone debt crisis weigh on demand. Moreover, a below-target inflation forecast added hopes of more asset purchases by the year end.
In its quarterly Inflation Report released Wednesday, the central bank said economic growth is likely to be around 2 percent in two years, down from the 2.6 percent expansion estimated in May.
"The impact of the euro-area debt crisis, together with the fiscal consolidation and tight credit conditions at home, is likely to continue to weigh on demand," the report said. The bank said the outlook for growth remains unusually uncertain.
The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.33 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, gained 0.16 percent.
The DAX of Germany dropped by 0.03 percent and the CAC 40 of France decreased by 0.43 percent. The FTSE 100 of the U.K. fell by 0.01 percent, but the SMI of Switzerland finished with a gain of 0.00 percent.
In Frankfurt, Fraport declined by 3.55 percent. The owner of Frankfurt Airport, reported lower earnings for the second quarter, even as revenues benefited from increased passenger traffic.
HSBC downgraded its rating on shares of Lanxess to 'Neutral' from 'Overweight.' The stock fell by 1.08 percent.
Brenntag slipped by 2.76 percent, after the chemical distributor reported higher profit for its second quarter as sales climbed despite difficult market conditions.
In Paris, GDF Suez closed down by 0.20 percent. Nomura reinitiated its "Buy" rating on the stock.
In London, Standard Chartered advanced by 8.12 percent, regaining some of the previous session's losses. Berenberg raised its rating on the stock.
Rio Tinto gained 2.86 percent. The miner reported a first-half profit that was better than what most analysts expected.
Serco Group dropped by 2.20 percent, after UBS downgraded the stock to "Neutral" from "Buy."
InterContinental Hotels Group decreased by 2.72 percent, after JP Morgan downgraded it to "Neutral" from "Overweight."
Cobham lost 5.37 percent, after the company reported first-half results.
Swisscom fell by 0.36 percent in Zurich, after the company's second-quarter profit declined.
German trade surplus unexpectedly increased in June as imports declined at a pace double than that of exports, indicating that the sovereign debt crisis and the economic slowdown has dampened both domestic and foreign demand. Trade surplus for June was EUR 17.9 billion compared to expectations of EUR 14.6 billion. The surplus figure grew from EUR 15.6 billion in May and EUR 12.5 billion in June last year.
Germany's industrial production decreased more-than-expected in June, adding to fears that the economy may have contracted in the second quarter, preliminary data showed Wednesday. Overall industrial production fell a calendar-and-seasonally adjusted 0.9 percent from May, the Ministry of Economics and Technology said. The rate of decline was slightly faster than 0.8 percent forecast by economists.
France business confidence weakened marginally as expected by economists for July, survey results from the Bank of France revealed Wednesday. The business sentiment index fell to 90 from 91 in June.
France's merchandise trade deficit increased in June, after falling in the previous month, according to data released Wednesday by the Directorate General of Customs and Excise. The trade deficit increased to EUR5.99 billion in June from EUR5.47 billion in May. Economists were looking for a shortfall of EUR5 billion.
Labor productivity in the U.S. rose by more than expected in the second quarter, according to a report released by the Labor Department on Wednesday, although the report also showed a sharper than expected jump in labor costs.
The report said productivity increased by 1.6 percent in the second quarter following a revised 0.5 percent drop in the first quarter. Economists had been expecting productivity to increase by about 1.3 percent compared to the 0.9 percent decrease originally reported for the previous quarter.
Unit labor costs rose by 1.7 percent in the second quarter compared to economist estimates for a 0.9 percent increase.
by RTT Staff Writer
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