The European markets finished to the upside on Monday, extending their gains from the end of last week. Continued optimism over the results of last week's EU summit was evident at the start of the new trading week. European leaders agreed on a 120-billion-euro growth pact and unveiled short-term measures to help Spain and Italy. The leaders also agreed to allow bailout funds to recapitalize banks directly, which sparked Friday's relief rally.
The positive performance of the European markets came despite weak manufacturing results from China and Europe. The markets trimmed some of their early gains in the afternoon, following the weaker than expected U.S. ISM manufacturing report, but they still finished to the upside.
French economic growth will be weaker than estimated earlier in 2012 and 2013, Finance Minister Pierre Moscovici indicated in an interview. Moscovici said the economic growth may reach around 0.4 percent in 2012, slightly weaker than 0.5 percent predicted earlier. The statistical office forecasts 0.4 percent growth for the economy this year. In 2013, an expansion within 1 to 1.3 percent appears "more credible," he told Figaro newspaper. The growth rate for 2013 was earlier set at 1.7 percent.
France may need up to 33 billion euros to cover the deficit gap in 2013, the national auditor said Monday in an annual report on the country's public finances. The country will have to find 6-10 billion euros in savings to meet this year's budget reduction target, the report pointed out. The Court of Auditors also said it sees the risk of acute revenue shortages during the coming months.
The Greek government's first priority should be to implement austerity measures and not to renegotiate the terms of bailout, European Central Bank policymaker Joerg Asmussen said Monday.
"The new government should not lose precious time looking to avoid or loosen the programme," he said. It should instead focus on how to maximize the effectiveness of reforms. More strong reforms are needed not for the benefit of Troika, or for any European leader, but for the good of Greece and its future, central banker said.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.98 percent, while the Stoxx Europe 50 index, which includes some major U.K. Companies, gained 1.46 percent.
The DAX of Germany climbed by 1.24 percent and the CAC 40 of France finished higher by 1.36 percent. The FTSE 100 of the U.K. rose by 1.06 percent and the SMI of Switzerland added 0.70 percent.
In Frankfurt, Linde declined by 1.83 percent. The company agreed to acquire U.S-based oxygen provider Lincare Holdings Inc. in an all-cash deal valued at around $4.6 billion.
Fresenius finished higher by 0.57 percent. The firm said Friday that minimum acceptance threshold of over 90 percent was not reached at the end of the offer period for private hospital operator Rhoen-Klinikum. Substantial trading volume was seen on the final day of the acceptance period, after rival Asklepios Kliniken built a stake of over 5 percent in Rhoen-Klinikum.
Commerzbank gained 2.47 percent and Deutsche Bank increased by 1.58 percent.
In Paris, Credit Agricole climbed by 6.91 percent, BNP rose by 4.33 percent and Societe Generale closed up by 2.93 percent.
In London, Barclays, which was fined 290 million pounds last week for attempting to manipulate the inter-bank lending rate, finished higher by 3.41 percent, after the lender's chairman Marcus Agius resigned.
Lloyds Banking closed up by 1.24 percent and Royal Bank of Scotland gained 1.34 percent. HSBC rose by 1.60 percent and Standard Chartered increased by 2.49 percent.
GlaxoSmithKline finished higher by 1.73 percent. The healthcare giant announced that it has reached an agreement to pay $3 billion to resolve criminal and civil liabilities with the U.S. Government.
Essar Energy climbed by 3.69 percent. The firm agreed to sell a 50 percent stake in an offshore gas exploration block in Vietnam to Italian oil firm Eni SpA.
Heritage Oil rose by 5.31 percent. The company has agreed to buy certain oil assets in Nigeria for $850 million.
Eurozone unemployment rate hit a new record high in May as companies struggle to contain their costs in the midst of stringent competition and weak demand. The jobless rate rose to a record 11.1 percent from 11 percent in April, Eurostat said Monday. The figure was in line with expectations.
The Eurozone Purchasing Managers' Index for the manufacturing sector remained unchanged in June from the prior month, but stayed slightly above the flash estimate, final data from Markit Economics showed Monday. The index was flat at 45.1 in June signaling that the downturn in the manufacturing sector extended to an eleventh successive month. The reading was above the flash reading of 44.8.
Germany's manufacturing sector contracted less-than-expected in June, yet at the fastest pace in three years, results of survey by Markit Economics revealed Monday. The final seasonally adjusted Markit/BME Germany Purchasing Managers' Index fell to 45.0 from 45.2 in May, its lowest reading for three years. The initial score was 44.7.
An indicator measuring the performance of the British manufacturing sector rose more than expected in June, but the index still pointed to a decline in activity rates. A survey by Markit Economics showed that the purchasing managers' index for the manufacturing sector rose to 48.6 in June from May's three-year low of 45.9. Economists expected an increase to 46.5.
Activity in the French Manufacturing sector decreased slightly more than initially estimated in June, but the rate of contraction eased from the previous month, final data from a survey by Markit Economics and CDAF showed Monday. The seasonally adjusted purchasing managers' index (PMI) for the manufacturing sector came in at 45.2 in June, a tad lower than 45.3 seen in the flash estimates.
Activity in the U.S. manufacturing sector contracted more than expected in the month of June, according to a report released by the Institute for Supply Management on Monday. With the bigger than expected decrease, the index pointed to a contraction for the first time since July of 2009, when it showed a reading of 49.2.
The ISM said its purchasing managers' index dropped to 49.7 in June from 53.5 in May, with a reading below 50 indicating a contraction in manufacturing activity. Economists had expected the index to show a much more modest decrease to a reading of 52.0.
U.S construction spending increased by more than expected in May even as revised figures showed stronger than initially reported construction spending growth in April, according to figures released Monday by the Commerce Department.
The initial estimate for construction spending in May came in at a seasonally adjusted annual rate of $830 billion, a 0.9 percent increase from revised April estimates. Although most economists had expected construction spending to increase in May, most had predicted a far more modest 0.2 percent increase.
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