European markets had been up in early trade Monday, following reports that the European Central Bank is considering government bond purchases. The news sparked a relief rally, especially in Spain and Italy. However, later in the session the German Bundesbank reiterated its opposition to such an action by the ECB. The markets then reversed direction and finished the session in the red. Shares of banks, energy stocks and miners were among the largest decliners.
The European Central Bank is considering setting limits on yields of Eurozone sovereign bonds, Germany's Spiegel magazine reported Sunday without mentioning its sources. The central bank will intervene and buy the bonds if their interest rates exceed a pre-determined threshold above German bonds, the magazine said.
Germany's central bank on Monday reiterated its opposition to the European Central Bank's plan to purchase government bonds. The decision to share solvency risks should be taken by governments, and not by central banks, Bundesbank said in its latest monthly report.
The German economy is likely to see a slower growth rate during the rest of this year, the Finance Ministry said in its latest monthly report released Monday.
Declining demand from the euro area economies is weighing on German economy, the Ministry said in the report. It noted that leading indicators point to a certain weakening of export momentum in the course of the year.
Greek Prime Minister Antonis Samaras is expected to meet some of the leaders of the currency bloc this week to request an extension of its fiscal consolidation program, reports said over the weekend. Samaras is expected to put forward a request for a two-year extension for the country's fiscal adjustment program.
Samaras will be visiting Luxembourg Prime Minister Jean-Claude Juncker, who heads the group of euro-area finance ministers, by the middle of this week. He will then travel to Berlin on Friday to meet German Chancellor Angela Merkel. The premier will also hold talks with French President Francois Hollande this week.
A Greek exit from the euro area would be manageable, but would be expensive, European Central Bank Executive Board member Joerg Asmussen was quoted as saying on Monday.
In an interview with the Frankfurter Rundschau, Asmussen said the Greek exit would be associated with reductions in growth and higher unemployment. An exit "would not be as orderly as some imagine," he said.
The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.22 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.35 percent.
The DAX of Germany dropped by 0.10 percent and the CAC 40 of France fell by 0.22 percent. The FTSE 100 of the U.K. decreased by 0.46 percent and the SMI of Switzerland finished lower by 0.35 percent.
In Frankfurt, Rheinmetall climbed by 0.98 percent after Berenberg upgraded the stock.
Commerzbank fell by 1.98 percent and Deutsche Bank lost 1.57 percent. Reports indicated that regulators in the U.S. are investigating Deutsche Bank over money-laundering charges.
In Paris, Societe Generale dropped by 3.62 percent. BNP Paribas fell by 1.76 percent and Credit Agricole finished down by 4.45 percent.
In London, mining stocks were under pressure. Rio Tinto fell by 1.32 percent and Kazakhmys lost 3.11 percent. Xstrata decreased by 3.39 percent.
Eurasian Natural Resources declined by 3.44 percent, after Credit Suisse downgraded the stock to "Neutral" from "Outperform."
Lonmin dropped by 4.61 percent, amid problems at its Marikana platinum mine near Johannesburg.
AstraZeneca dipped by 0.47 percent. JPMorgan downgraded its rating on the stock to "Underweight" from "Neutral."
Insurer Amlin surged by 2.62 percent, after reporting a profit for the first half of the year.
Home Retail gained 3.55 percent, reportedly on a positive broker recommendation.
Eurozone construction output declined for the third consecutive month in June, Eurostat reported Monday. In the construction sector, seasonally adjusted production dropped 0.5 percent from a month ago, when it fell 0.2 percent.
The U.K. household finance index rose for the third consecutive month in August, reaching the highest level since December 2010, a survey from Markit Economics showed Monday. The index came in at 38.9, up from 37.5 in July.
by RTT Staff Writer
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