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European Markets Edged Lower With Weakness Among Banks

4/18/2012 12:01 PM ET

The European markets pulled back Wednesday, following the recovery at the beginning of the trading week. Concerns over the Spanish banking sector weighed on the rest of the European banks. Meanwhile, mining companies were a source of strength, as were the drug-makers. There was no help to be found in the afternoon, with the weak performance of the U.S. stock markets, due to some mixed earnings results.

Spain's bad loans reached an 18-year high in February, data from the Bank of Spain showed Wednesday. About 8.16 percent of loans held by banks in February were non-performing, the highest since October 1994. In January, only 7.9 percent of total debt was non-performing. The amount of doubtful debt rose to EUR 143.8 billion, up EUR 3.8 billion from January.

Bank of England's Monetary Policy Committee (MPC) decided to maintain the size of the asset purchase programme through a split vote as one member called for an increase in stimulus, the minutes of the meeting showed Wednesday. At the same time, the committee unanimously decided to maintain the interest rate at a historic low of 0.50 percent. Eight members of the committee, including Governor Mervyn King, voted to retain the quantitative easing at GBP 325 billion.

Bank of England Deputy Governor Paul Tucker on Wednesday said inflation remains uncomfortably above target. Speaking to the Association of Corporate Treasurers in Liverpool, Tucker said inflation will stay above 3 percent throughout the second quarter of this year, and possibly into the second half of the year.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 1.64 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, fell by 0.39 percent.

The DAX of Germany finished lower by 1.01 percent and the CAC 40 of France lost 1.59 percent. The FTSE 100 of the U.K. closed down by 0.38 percent and the SMI of Switzerland dipped by 0.43 percent.

In Frankfurt, SGL Carbon dropped by 2.97 percent, after the carbon fiber maker said it would issue convertible notes to fund the company's expansion in Portugal and China.

Commerzbank declined by 2.21 percent and Deutsche Bank dropped by 2.06 percent.

Volkswagen finished lower by 1.20 percent on a report that it will announce plans for a new factory and other projects in China on April 23.

Shares of Siemens dropped by 2.47 percent. Media reports suggested that the company's full year profit forecast may be at risk.

In Paris, Accor SA rose by 0.41 percent after the hotel group reported a 4.5 percent increase in revenues for the first quarter on a like-for-like basis.

LVMH Moet Hennessy Louis Vuitton declined by 3.30 percent. The company reported a 25 percent increase in first quarter sales.

Societe Generale finished lower by 5.01 percent. Credit Agricole lost 4.36 percent and BNP Paribas decreased by 3.19 percent.

In London, BHP Billiton climbed by 0.86 percent after reporting a 14 percent rise in iron ore production in the third-quarter.

Fresnillo rose by 3.24 percent after the company's first quarter gold production topped expectations.

Barclays fell by 2.86 percent and Lloyds Banking Group declined by 3.17 percent. Royal Bank of Scotland dropped by 3.06 percent and Standard Chartered closed lower by 2.12 percent.

Tesco Plc decreased by 2.21 percent after the retailer unveiled a £1billion revival plan.

In Zurich, Roche announced that it will not extend its tender offer to acquire U.S. company Illumina. Roche finished higher by 0.99 percent.

Shares of Nestle dipped by 0.18 percent. The company is reportedly near a deal to acquire the baby formula unit of U.S. company Pfizer.

Construction output in the euro area decreased for the third month in a row in February, data released by statistical office Eurostat showed Wednesday. Construction output decreased a seasonally adjusted 7.1 percent on a monthly basis in February, sharply faster than the 0.5 percent decrease seen in January. Output dropped for the third consecutive month.

The Eurozone current account unexpectedly logged a seasonally adjusted deficit of EUR 1.3 billion in February, the European Central Bank said Wednesday. Economists were expecting the surplus to fall to EUR 2 billion from EUR 3.7 billion surplus seen in January.

Jobless claims in the UK rose weaker than expected in March, the latest figures from the Office for National Statistics showed Wednesday. The claimant count in March was 1.61 million, up 3,600 on the previous month. Economists expected an increase of 6,000.

by RTT Staff Writer

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