Inflation Rises in Europe; Nokia Lowers Outlook

Arthi Gupta, Mayank Mehta and Sanjay Barot
16 Jun, 2010
New York City

European markets pare early gains after weaker-than-expected U.S. economic data. Euro-zone inflation rises to 1.6% in May and labor costs increase at a faster pace in the first quarter. Zodiac SA quarterly revenues rise 2.6%.

[R]4:30 PM Frankfurt - European markets pare early gains after weaker-than-expected U.S. economic data. Euro-zone inflation rises to 1.6% in May and labor costs increase at a faster pace in the first quarter. Zodiac SA quarterly revenues rise 2.6%.[/R]

Nokia reduces its devices and services outlook for the second quarter. OECD urges Netherlands to focus on budget consolidation.

In London FTSE 100 Index traded higher 2.53 or 0.05% to 5,220.35, in Paris CAC 40 Index decreased 8.93 or 0.24% to close at 3,652.58, in Frankfurt DAX Index traded lower 11.86 or 0.19% to close at 6,163.19. In Zurich trading SMI Index decreased 19.11 or 0.29% to close at 6,465.62.

Annual consumer price inflation in the 16-nation euro bloc rose to 1.6% in May from 1.5% in the previous month, according to a report released by Eurostat today.

The highest inflation rate in May was observed in Greece at 5.3% and the lowest were seen in the Republic of Ireland and the Netherlands at 1.9% and 0.4% respectively. The main components contributing to the rise in inflation in May were transport and alcohol & tobacco.

Annual inflation in the whole of the European Union was unchanged at 2%.

Euro-zone''s hourly labor costs increased at a faster pace in the first quarter, according to data released by Eurostat today.

Hourly labor costs grew a working day adjusted 2.1% year-on-year in the first quarter, faster than the 1.7% growth in the previous quarter, which was revised from 2.2% rise reported initially.

In the EU27, hourly labor costs grew 2.2% year-on-year in the first quarter, compared to the 2% in the previous quarter, revised from 2.4% rise estimated initially.

The incoming Dutch government should initialize steps for strict fiscal consolidation, gradual exit of stimulus policies and structural reforms, the Organization for Economic Cooperation and Development, or OECD, said today.

""As economic growth strengthens, the government coming in after the June 2010 elections will be confronted with the task of consolidating public finances without putting the recovery at risk,"" the Paris-based agency said in its economic survey report for the Netherlands.

The report also noted that the new government should start withdrawing stimulus measures as soon as the recovery gains strength. Consolidation of public finances is necessary for fiscal sustainability and the process will start only by withdrawing stimulus and through drastic spending cuts, the group said.

Nokia Corp. announced that it expects Devices & Services net sales to be at the lower end of, or slightly below, its previously expected range of €6.7 billion to €7.2 billion for the second quarter 2010. The company said that this update is primarily due to lower than previously expected average selling prices and mobile device volumes.

The company now expects Devices & Services non-IFRS operating margin to be at the lower end of, or slightly below its previously expected range of 9% to 12% for the second quarter 2010.

Gainers & Losers

Axel Springer Verlag AG, the media company fell 0.2% to €79.58.

Bayer AG, the provider of health care, nutrition and high-tech materials rose 0.3% to €48.28.

CGG Veritas rose 2.1% to €17.00 after the manufacturer of geophysical equipment announced today that it has signed a Technology Cooperation Agreement with the Brazilian energy company, Petrobras, for the collaborative development and implementation of new technologies in the field of geophysics.

Deutsche Bank AG, the investment bank rose 0.7% to €49.94.

Draegerwerk AG & Co. KGaA fell 1.7% to €55.25. The medical and safety technology company was upgraded to “overweight” from “neutral” at HSBC Holdings Plc.

Infineon Technologies AG, the semiconductor manufacturer rose 1.0% to €5.17.

Orpea SA rose 2.2% to €33.10 after the commercial retirement home operator has upgraded its recommendation to “overweight” from “neutral” at HSBC Holdings Plc.

Rodriguez Group SA, the luxury yacht management firm surges 10.0% to €4.17.

RWE AG, the utility fell 0.3% to €57.12.

Ubisoft Entertainment SA, the videogames maker rose 3.3% to €8.02.

Zodiac SA rose 1.4% to €44.50 after the aeronautical company said third quarter revenues rose 2.6% to €583.3 million from €568.7 million a year ago.

Revenues for nine months fell 8% to €1.55 billion from €1.68 billion a year ago.