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European Markets Climbed After Greek Upgrade

12/19/2012 12:01 PM ET

The European markets ended Wednesday's trading session in the green, following an upgrade of Greece's credit rating by S&P. Investor sentiment also received a boost from the stronger than expected German Ifo business confidence result. Shares of banks turned in a solid performance, after Credit Suisse upgraded its rating on the European banking sector.

The continuing fiscal cliff negotiations between Democrats and Republicans has made investors optimistic that a deal can be reached before the end of the year. The White House threatened to veto the 'Plan B' presented by House Speaker John Boehner. Senate Majority Leader Harry Reid had already said that Boehner's plan could not pass the Senate. Plan B would extend tax cuts for people making up to $1 million.

Standard and Poor's on Tuesday upgraded Greece's credit rating from 'selective default' (SD), citing the successful completion of the country's debt buyback program and the subsequent decision by European leaders to disburse loan installment.

Greece's long and short-term foreign as well as local currency sovereign credit ratings were lifted to 'B-' from 'SD'. Further, the ratings on all the outstanding issues, including those guaranteed by Greece, were upgraded to 'B-/B'. The outlook is 'stable'.

Bank of England policymakers voted 8-1 to leave the stimulus programme unchanged at GBP 375 billion as seen in November, the minutes of the latest monetary policy meeting showed Wednesday.

David Miles was the only member to call for more quantitative easing. According to minutes, the Monetary Policy Committee members said the current size of the asset purchase programme seemed appropriate for the present.

Further, the nine-member MPC unanimously decided to hold the key interest rate at a record low 0.50 percent. The meeting was held on December 5 and 6.

The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.41 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.23 percent.

The DAX of Germany climbed by 0.25 percent and the CAC 40 of France gained 0.44 percent. The FTSE 100 of the U.K. rose by 0.43 percent and the SMI of Switzerland advanced by 0.71 percent.

In Frankfurt, Heidelberg Cement climbed by 5.17 percent. Deutsche Bank reiterated its "Buy" rating on the stock.

Merck dropped by 2.10 percent. The drug-maker announced that its investigational product L-BLP25, formerly referred to as Stimuvax, failed to demonstrate a statistically significant improvement in overall survival in the START study.

ThyssenKrupp rose by 2.59 percent, after Credit Suisse upgraded its rating on the stock to "Outperform" from "Neutral."

Commerzbank advanced by 0.60 percent and Deutsche Bank climbed by 1.40 percent.

In Paris, BNP Paribas gained 1.60 percent and Credit Agricole added 2.30 percent.

Lafarge gained 3.02 percent, after Deutsche Bank upgraded the stock to "Buy" from "Hold."

In London, Acta SpA surged by 8.46 percent. The clean energy products company said it has signed a Letter of Intent with Indian supplier of industrial gas equipment and solutions MVS Engineering.

Lloyds Banking Group climbed by 4.37 percent and Barclays added 2.07 percent. Royal Bank of Scotland rose by 3.38 percent and HSBC gained 2.0 percent.

CRH finished higher by 4.88 percent, after Deutsche Bank upgraded its rating on the stock to "Buy" from "Hold."

British American Tobacco declined by 2.55 percent. Credit Suisse reduced its rating on the tobacco sector to "Underweight."

Diageo increased by 0.49 percent and SAB Miller gained 0.76 percent. Credit Suisse upgraded the beverage sector to "Overweight."

UBS decreased by 0.20 percent in Zurich. The banking giant agreed to pay nearly 1.4 billion Swiss Francs in fines and disgorgement to settle a multi-regulator probe over allegations that it tried to manipulated yen Libor and euroyen contracts.

Eurozone's current account surplus increased in October, but was lower than expected by economists, a report from the European Central Bank showed Wednesday. The seasonally adjusted current account surplus rose to EUR 3.9 billion in October from EUR 2.4 billion in September. Economists expected the surplus to rise to EUR 6.5 billion.

Euro area construction output in October declined at a faster annual rate again, data released by Eurostat, the statistical office of the European Union, revealed on Wednesday.

Construction output fell further by a seasonally adjusted 4.1 percent year-on-year in October, after recording a decline of 3.8 percent in September, which was revised from 2.6 percent reported earlier. In August, output decreased 1.5 percent.

German business confidence improved for the second straight month in December as expectations for next six months counteracted the deterioration in current assessment, survey results from the Ifo Institute showed Friday.

Surpassing economists' expectations, the headline business climate index rose to a five-month high of 102.4 from 101.4 in November. The reading was forecast to climb to 102.

Germany's leading economic indicator remained unchanged in October, ending the downward trend started in March, data from a survey by the Conference Board showed Wednesday. The leading economic index remained unchanged at 101.6 in October after dropping 0.6 percent in the previous month.

Housing starts in the U.S. came in below economist estimates in the month of November, according to a report released by the Commerce Department on Wednesday, although the report also showed a notable increase in building permits.

The report said housing starts fell 3.0 percent to an annual rate of 861,000 in November from the revised October estimate of 888,000. Economists had been expecting housing starts to fall to 865,000 from the 894,000 originally reported for October.

by RTT Staff Writer

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