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European Markets Extended Recent Losses Wednesday

4/17/2013 11:56 AM ET

The European markets extended their recent losing streak to a fourth consecutive session on Wednesday. Shares of commodity related stocks continued their weak performance. The DAX of Germany was particularly hard hit due to rumors that the country may be facing a sovereign downgrade. There was no help to be found in the afternoon, due to the weak performance of the U.S. markets.

The French public debt is likely to increase one more year than expected to peak at 94.3 percent of gross domestic product in 2014, the government's budget plan showed Wednesday. The stability plan also revealed that the government will stick to its spending cut programme. The plan will be submitted to the European Commission in April.

The government forecasts the economy to grow 0.1 percent this year and 1.2 percent next year. Meanwhile, the budget deficit is expected to narrow to 3.7 percent in 2013, above the 3 percent ceiling. The government pledged to reduce the gap further to 2.9 percent in 2014, it said.

The call for more stimulus by Bank of England Governor Mervyn King was overruled by a majority of policymakers for a third month, over fears that further easing might exacerbate inflation expectations and prompt renewed weakness in the pound.

Nonetheless, policymakers became more open to extension of asset purchases in the face of significant degree of slack in the economy and weak wage growth.

At the meeting held on April 3 and 4, the nine-member Monetary Policy Committee unanimously decided to maintain the record low 0.50 percent interest rate.

As seen in February and March, King along with Paul Fisher and David Miles sought an increase in asset purchases by GBP 25 billion to a total GBP 400 billion, while six other members voted to retain the asset purchase programme at GBP 375 billion.

The involvement of the International Monetary Fund in future rescue package for the euro area member countries is highly desirable, European Central Bank Executive Board Member Peter Praet said Wednesday.

"The involvement of the IMF in the financing schemes is not strictly required but is still highly desirable, also in view of the Fund's analytical expertise in crisis resolution," he said at an event in Beijing.

Bank of England Governor Mervyn King said circumstances demanded central banks to take extraordinary measures, but such measures will put their hard-won independence at risk.

"Such measures can risk moving into territory more normally associated with fiscal policy and, in doing so, put at risk their hard-won independence," he said in remarks prepared for an International Monetary Fund discussion panel on Tuesday.

The expansion of central bank responsibilities to include macro prudential policy and responsibility for regulating the banking system has made independence much harder to define, King observed.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 2.07 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, 1.60 percent.

The DAX of Germany dropped by 2.34 percent and the CAC 40 of France fell by 2.35 percent. The FTSE 100 of the U.K. decreased by 1.01 percent and the SMI of Switzerland lost 2.38 percent.

In Frankfurt, car-maker Daimler declined by 1.99 percent. The company sold its remaining stake in Airbus parent company EADS as part of a strategy to focus solely on its core automotive business.

Bayer fell by 4.28 percent, a day after a U.S. appeals court ruled the company's patent on the birth control pill Yaz is invalid.

BASF finished lower by 3.46 percent. Nomura downgraded its rating on the stock to "Neutral" from "Buy."

In Paris, EADS increased by 4.85 percent. The company repurchased the 1.56 percent of its stock that was held by the French state.

In London, BHP Billiton dropped by 3.39 percent. The company reported a 6 percent increase in iron ore production for the final quarter of 2012 and reaffirmed its iron ore production guidance of 183 million tons for the 2013 financial year.

Rio Tinto, which announced cost-cutting measures following operational disruptions to a copper mine, is decreased by 3.61 percent.

Tesco fell by 3.92 percent, after the company's quarterly profit declined.

Burberry climbed by 1.82 percent, after the retailer reported an increase in comparable store sales for the second half of the year.

Eurozone's construction production decreased at a slower pace in February, data released by statistical office Eurostat showed Wednesday. Construction production decreased 0.8 percent month-on-month in February, slower than the 2.1 percent decrease seen in January.

New car registrations in the European Union continued to fall in March, data published by the European Automobile Manufacturers' Association (ACEA) showed Wednesday. Car registrations fell 10.2 percent year-on-year in March, following a 10.5 percent drop in February and an 8.7 percent decline in January.

A leading indicator of the Spanish economy declined for the first time in six months in February, data from a survey by the Conference Board showed Wednesday. The leading economic index declined 0.3 percent sequentially to 104.8 in February

The number of Britons claiming unemployment benefits decreased unexpectedly in March. Meanwhile, the unemployment rate increased in the three months ended February, and regular wages of U.K. employees recorded the weakest growth on record, signaling that the resilience of the labor market is waning.

The number of persons seeking jobless allowance, or the claimant count, dropped by 7,000 sequentially to around 1.53 million in March, after falling by 5,300 in February, the Office for National Statistics said Wednesday. Economists had forecast the claimant count to remain unchanged.

by RTT Staff Writer

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