The majority of the European markets ended Friday's session in positive territory, after reports that the government of Spain is engaged in discussions over a potential bailout. Meanwhile, the discussions in Greece continue and while the situation is not yet resolved, some progress has been made.
The Spanish government and the European Commission are in talks over measures that would be demanded by creditors if the country places an official bailout request, Financial Times reported Thursday citing unnamed officials involved in discussions.
According to the newspaper, the plan will be unveiled next Thursday and will focus on structural reforms rather than new taxes and spending cuts.
Discussions between the Greece government and international creditors to fix a deal on EUR 11.5 billion spending reduction reached no clear conclusion late Thursday.
But some progress has been made on lifting the retirement age and pension cuts, which would together contribute a saving of EUR 9.5 billion. A final deal is crucial for Greece to receive a EUR 31.5 billion in aid.
Officials from the European Commission, the International Monetary Fund and the European Central Bank, collectively known as the troika, will leave Athens this weekend. The troika mission is set to come back next week again to finalize the terms if it is not resolved soon.
The Italian government on Thursday slashed the economy's growth forecasts, while sharply hiking its budget deficit targets.
The government led by Prime Minister Mario Monti now forecasts the economy to contract 2.4 percent this year, double the April projection of 1.2 percent contraction.
The recession is forecast to continue in 2013 with the gross domestic product shrinking 0.2 percent, in contrast to the previous projection of 0.5 percent growth.
Rome, meanwhile, hiked its prediction for budget deficit this year to 2.6 percent of GDP from 1.7 percent projected in April. The deficit target for 2013 was lifted to 1.8 percent of GDP from 0.5 percent.
Inflation expectations in Eurozone are firmly anchored, European Central Bank Executive Board member Peter Praet wrote in an opinion piece in German Finance Ministry's monthly report published Friday.
"There is price stability in the euro area, and long-term inflation expectations are firmly anchored at a level that is in line with price stability," he opined. According to Praet, the euro itself was not in crisis.
The British economy may start recovering towards the end of this year and into next year, Bank of England Chief Economist Spencer Dale told BBC Radio Lincolnshire on Friday. There is "a light at the end of the tunnel" for the economy and this is "an uncertain light," he said.
In an interview to Channel 4 television on Thursday, Bank of England Governor Mervyn King said the U.K. is likely to experience a slow recovery. He also said that it is "acceptable" for the UK to miss debt target given the weak growth.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.85 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.42 percent.
The DAX of Germany climbed by 0.84 percent and the CA 40 of France gained 0.59 percent. The SMI of Switzerland rose by 0.75 percent, but the FTSE 100 of the U.K. declined by 0.03 percent.
In Frankfurt, MAN gained 0.63 percent after JPMorgan raised its price target on the stock.
Adidas dropped by 0.40 percent, after the company slashed its 2015 sales target for the Reebok brand.
Duerr finished lower by 2.78 percent. Berenberg downgraded the stock to "Hold" from "Buy."
In Paris, Technip climbed by 2.01 percent. The company was awarded a contract by Statoil for the fabrication, installation and tie-ins of flowlines for the Gullfaks South field development.
In London, BP lost 0.74 percent. Ireland-headquartered DCC has signed a conditional agreement with BP to buy its liquefied petroleum gas distribution business in the Netherlands and Belgium.
National Grid fell by 1.08 percent, after JP Morgan downgraded the stock to "Underweight" from "Neutral."
Hansard Global sank by 14.41 percent, after the specialist long-term savings provider reported a decline in fiscal 2012 profit.
Essenden surged by 33.33 percent, after the company posted a significantly higher pre-tax profit for its first half, helped by lower costs.
Kuoni rose by 1.15 percent in Zurich. The leisure travel company plans to explore exit options for its small loss-making tour operating businesses that are not of strategic relevance to the company.
A leading indicator of the German economy increased moderately in July, after falling for four consecutive months, indicating that economic activity will continue to expand in the near term, though at a slower rate, data from a survey by the Conference Board showed Friday.
The leading economic index edged up 0.1 percent from the previous month to 102.6 in July, recovering from decreases seen in the previous four months. The rebound in the index reflected large positive contributions from stock prices and new residential construction orders, which more than offset the negative contribution from consumer confidence.
The U.K. logged the biggest budget deficit for the month of August as benefit payments increased and corporation tax receipts declined, data from the Office for National Statistics showed Friday.
Excluding intervention, public sector net borrowing was GBP 14.4 billion in August, which was equal to the net borrowing in August 2011. Nonetheless, the deficit was slightly below the GBP 15 billion shortfall forecast by economists.
UK's house price sentiment continued to remain weak, with households reporting decline in prices for the twenty-seventh consecutive month in September, though at a slower rate, data from a survey by Markit Economics and Knight Frank showed Friday.
The house price sentiment index came in at 46.8 in September, up from 44.5 recorded in August. The latest reading indicated the slowest decrease in prices since July 2010.
by RTT Staff Writer
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