The European markets ended Tuesday's session with mixed results. The markets had been largely negative in early trade, but the positive open of the U.S. markets in the afternoon provided a boost which allowed several markets to finish in positive territory. Investors have been in a holding pattern since the new trading week began, as the next few days will see the release of some potentially market moving news.
Investors are awaiting a court ruling in Germany on Wednesday, regarding the legality of the European Stability Mechanism. The ruling could potentially jeopardize the bond purchase plan announced by the European Central Bank last week, which sparked the strong rally in stocks on Thursday and Friday. Investors are also waiting for the results of the latest U.S. FOMC meeting and Chairman Ben Bernanke's press conference on Thursday.
Germany's top court is set to deliver a crucial judgment on the viability of the European Stability Mechanism, or ESM, and the fiscal pact on Wednesday, which would decide the fate of the EUR 500 billion bailout fund and the future course of the region's fight with the protracted debt crisis.
While politicians expressed confidence that the bailout fund will survive, many economists feel that the Federal Constitutional Court in Karlsruhe may delay the ruling or even impose some conditions, rather than rule against it. Both houses of the Parliament approved the ESM and the fiscal pact on June 29, with two-thirds of the German lawmakers voting in favor of it.
Peter Gauweiler, a lawmaker in Chancellor Angela Merkel's ruling party and one of the plaintiffs who lodged a temporary injunction request against the ESM, said in a statement on Sunday that the fund should not be ratified until the ECB revoke its plans to become "a hyper rescue fund."
Europe still has a "long way to go" in resolving its debt crisis, International Monetary Fund Deputy Managing Director Zhu Min reportedly said Tuesday.
"The crisis is not over," he was quoted as saying during a speech at the World Economic Forum in the Chinese port city of Tianjin. "We are still in the middle" and "there is a long way to go," he said. Zhu also urged Europe to keep faith in the single currency.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 1.14 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.61 percent.
The DAX of Germany climbed by 1.34 percent and the CAC 40 of France gained 0.89 percent. The FTSE 100 of the U.K. declined by 0.02 percent and the SMI of Switzerland lost 0.07 percent.
In Frankfurt, HeidelbergCement fell by 0.31 percent. Merrill Lynch reinitiated the stock with an "Underperform" rating.
Deutsche Bank climbed by 4.10 percent and Commerzbank gained 0.76 percent.
Kontron finished higher by 0.64 percent, after Berenberg downgraded its rating on the stock.
In Paris, LVMH dropped by 3.36 percent, after Burberry issued a profit warning in the U.K. PPR also declined by 2.07 percent.
Sanofi climbed by 2.56 percent. The drug maker's vaccines division said its vaccine candidate protects against dengue fever caused by three dengue virus types.
Societe Generale finished higher by 1.04 percent, BNP Paribas gained 2.21 percent and Credit Agricole increased by 1.14 percent.
In London, Burberry plunged by 20.87 percent, after issuing a profit warning. The company now expects its full year profit to come in at the low end of expectations.
Barclays increased by 2.77 percent and Royal Bank of Scotland added 4.62 percent.
IG Group rose by 6.53 percent. The company reported first-quarter revenues in line with expectations.
Germany's wholesale price inflation accelerated for the second consecutive month in August, data released by the Federal Statistical Office showed Tuesday. The wholesale price index increased 3.1 percent on an annual basis in August, faster than the 2 percent growth seen in July. In June and May, the index rose 1.1 percent and 1.7 percent respectively.
French payroll employment in principally market sectors declined 0.1 percent in the second quarter, final data from the statistical office Insee showed Tuesday. That follows a 0.1 percent rise in the first quarter.
The U.K. visible trade deficit narrowed sharply in July driven by strong growth in exports, weathering the global economic slowdown. The visible trade gap fell more-than-expected to GBP 7.1 billion in July, the smallest since February 2011, data from the Office for National Statistics revealed Tuesday. The deficit was forecast to drop to GBP 10 billion from GBP 10.1 billion in June.
With the value of exports falling by more than the value of imports, the U.S. trade deficit widened in July but still came in much narrower than the expectations of most economists. According to figures released by the Commerce Department on Tuesday, the U.S. exported $183.3 billion worth of goods and services in July, compared to imports of $225.3 billion for the month.
The difference marks a trade deficit of $42.0 billion in July compared to the June trade deficit of $41.9 billion. While slightly wider compared to the previous month, the trade deficit is much narrower than the $44.3 billion deficit projected by most economists, in part because of the revision of the June deficit figures from the $42.9 billion initially reported.
by RTT Staff Writer
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