EU Plans Stimulus Exit; Stocks Down

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

European markets fluctuate after moderate U.S. economic data and on worries concerning the euro area sovereign debt crisis. Euro-zone industrial new orders rise 0.9% in April. French consumer spending grows 0.7% in May.

[R]5:00 PM Frankfurt - European markets fluctuate after moderate U.S. economic data and on worries concerning the euro area sovereign debt crisis. Euro-zone industrial new orders rise 0.9% in April. French consumer spending grows 0.7% in May.[/R]

U.S.-based Amyris and France-based Total SA partner agree to develop biomass-based fuels and chemicals.

In London FTSE 100 Index traded lower 23.09 or 0.45% to 5,155.43, in Paris CAC 40 Index decreased 27.58 or 0.76% to close at 3,614.21, in Frankfurt DAX Index traded lower 22.31 or 0.36% to close at 6,182.21. In Zurich trading SMI Index decreased 13.98 or 0.22% to close at 6,367.87.

Euro-zone industrial orders grew more than expected in April from the previous year, recording its highest growth in a decade.

Euro-zone industrial new orders rose 0.9% in April, compared with March''s revised increase of 5.1%, according to data released by the statistical office Eurostat today. On an annual basis, industrial order growth accelerated to 22.1% from 20.3%.

In EU27, new orders fell 0.2% in April after a revised increase of 7.1% in March. On an annual basis, growth accelerated to 21.8% from 21.3%.

French consumer spending rose more than expected in May as expenditure on durables rebounded strongly mainly due to the soccer World Cup sales, according to data released by the statistical office Insee today.

Consumer spending rebounded 0.7% in May after a revised decline of 1.3% in April. On an annual basis, spending grew 1.9% in May, faster than April''s 1% rise.

The statistical office said on Wednesday the French economy is expected to grow 1.4% this year following a 2.5% contraction in 2009. The statistical office also raised its growth estimate for the second quarter to 0.5% from 0.3%.

Euro-zone is unlikely to face deflationary risks and the austerity measures will not lead to stagnation, European Central Bank President Jean-Claude Trichet told Italian newspaper La Repubblica.

According to text of an interview, held on June 16, published on the ECB Web site today, Trichet said, ""I don''t think that such risks could materialize. On the contrary, inflation expectations are remarkably well anchored in line with our definition - less than 2%, close to 2% - and have remained so during the recent crisis.""

""As regards the economy, the idea that austerity measures could trigger stagnation is incorrect,"" he added.

When asked about the euro, Trichet repeated that the euro is a credible currency. ""A currency which safeguards price stability is a major asset in the eyes of investors, both domestic and international,"" he said.

The European Union has called on the G20 group of nations to coordinate with each other in planning exit strategies from stimulus support measures ahead of this weekend''s summit in Toronto.

In an open letter, European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso said a coordinated exit strategy could prevent spill-over effects that would adversely affect individual countries.

""The G20 should agree on a coordinated and differentiated exit strategy to ensure sustainable public finances,"" the letter said. ""Even though the timing, sequencing and scope of exit measures have to be tailored to conditions prevailing in the individual G20 members, coordination between governments can help take us into account possible spill-over effects.""

E.U. leaders also called on G20 nations to come to a consensus on introducing levies on bank profits. ""We consider that international work on levies and taxes on financial institutions should continue to maintain a worldwide level playing field,"" the letter said. ""Also the introduction of a global financial transaction tax should be explored and developed further in that context.""

The letter pledged to ensure fiscal sustainability within the E.U. and achieve budgetary targets without delay. It also welcomed China''s decision to reform its exchange rate policy and allow its currency, the yuan, to appreciate.

Total SA, the French oil and gas explorer and the U.S. based biotechnology firm Amyris Inc. announced on Wednesday a strategic partnership to develop new products and build biological pathways to produce and commercialize renewable fuels and chemicals. Under the terms of the deal, Total has agreed to acquire about 17% equity interest in Amyris, and gets the right to appoint a member to the Board of Directors.

The partnership combines Amyris'' industrial synthetic biology platform and emerging Brazilian production capacity with Total''s technological know-how, industrial scale-up capabilities and access to markets

Gainers & Losers

Adidas AG fell 2.8% to €41.42 after the producer of sportswear and sports equipment downgraded its recommendation to “reduce” from “hold” at Kepler Capital Markets.

BNP Paribas SA, the bank fell 2.2% to €47.23.

Commerzbank AG, the bank fell 2.0% to €5.87.

Deutsche Bank AG, the global investment bank fell 2.1% to €47.73.

Fimalac SA rose 0.5% to €31.81 after the international financial services company’s subsidiary Algorithmics announced that it had acquired VIPitech from Towers Watson.

GDF Suez SA fell 1.2% to €25.28 pence after the natural gas and electricity supplier traded unchanged at €25.60.

KTG Agrar AG, the producer of agricultural resources rose 1.6% to €15.00.

Porsche Automobil Holding SE fell 2.3% to €35.50 after the car manufacture industry downgraded its recommendation on the stock to “sell” from “buy” at DZ Bank AG.

Roth & Rau AG rose 5.4% to €23.14 after the provider of components and plasma process equipment has received a major order worth €92 million to supply a well-known Indian solar company with a wafer production line.

Sanofi-Aventis, the pharmaceutical group fell 0.7% to €49.89.

Siemens AG fell 1.4% to €76.21 after the multinational company was downgraded to “market perform” from “outperform” at Sanford C. Bernstein & Co. LLC.

Societe Generale SA, the bank fell 2.5% to €35.90.

Suez Environnement SA, the utility fell 1.2% to €14.09.

Theolia SA, the developer and operator of wind energy projects fell 3.8% to €2.26.

Total SA, the integrated international oil and gas explorer fell 0.7% to €38.95.