European Markets Weak; Retail Sales Rise

Arthi Gupta, Mayank Mehta and Sanjay Barot
05 Jul, 2010
New York City

European markets trade sideways on mixed economic data. The ECB Chief stresses on austerity measures and deficit cuts. Euro-zone retail sales grow 0.2% in May and private sector activity weakens further in June. Japan''s Daiwa agrees to buy Belgium based KBC

[R]7:00 PM Frankfurt - European markets trade sideways on mixed economic data. The ECB Chief stresses on austerity measures and deficit cuts. Euro-zone retail sales grow 0.2% in May and private sector activity weakens further in June. Japan''s Daiwa agrees to buy Belgium based KBC’s derivatives business for $1 billion.[/R]

Mixed trends were seen in Asian markets on speculation that global economic recovery may be decelerating. Euro-zone investor confidence rises in July. French PMI drops in June.

In London FTSE 100 Index traded higher 8.29 or 0.17% to 4,846.38, in Paris CAC 40 Index decreased 0.48 or 0.01% to close at 3,347.89, in Frankfurt DAX Index traded higher 6.93 or 0.12% to close at 5,841.08. In Zurich trading SMI Index decreased 12.99 or 0.22% to close at 5,961.31.

French Economy Minister Christine Lagarde said that the results of European bank stress tests which will be released on July 23 would show that Europe''s banks are ""solid and healthy.""

European Central Bank President Jean-Claude Trichet said on Sunday that EU governments must bring down their budget deficits to boost economic growth.

Speaking to reporters in Aix-en-Provence of France, the ECB chief said austerity measures and deficit cut programs will not harm growth. Instead, they would help to build household and investor confidence key to economic growth.

Euro-zone retail sales rose in May after falling in April, according to the Eurostat today. The increase was led by a pick-up in sales of food, drinks and tobacco and non-food sales.

Retail sales rose 0.2% in May from the revised April''s decline of 0.9%. Retail sales of food, drinks and tobacco rose 0.2% in May following a decline of 0.6% in April. Sales of non-food products increased 0.4% after a 0.8% fall.

In EU27, retail sales grew 0.4% on a monthly basis and 0.5% over a year earlier.

Growth in euro-zone private sector activity eased for the second straight month in June, reflecting a slowdown in new order and output growth.

Flash euro-zone composite output index that combines manufacturing and services purchasing managers'' indexes, fell to a three-month low of 56 in June from 56.4 in May, according to a survey data released by the Markit.

Separate data showed that the services purchasing managers'' index fell to a three-month low of 55.5 in June from 56.2 in May.

Investor confidence in the euro-zone unexpectedly rose in July, as assessment on current economic situation turned positive, a survey published by the Sentix research group revealed today.

The investor sentiment index stood at minus 1.3, up from minus 4.1 recorded in June.

French service sector activity expanded at a slower pace in June, according to a final report by the Markit Economics released today.

The purchasing managers’ index for services dropped to 60.8 in June from 61.4 in the previous month.

Japan''s Daiwa Capital Markets will acquire Belgium-based KBC Group''s global convertible bond and Asian equity derivative businesses for nearly $1 billion.

Of the total, $200 million would be for assets, including staff and IT infrastructure while the rest would be for the trading position. The deal is anticipated to close in the fourth quarter of 2010.

""By acquiring these KBC businesses, Daiwa immediately becomes a significant player in the global convertible bonds and Asian derivatives markets,"" Daiwa''s Global Head of Derivatives Dominique Blanchard said.

Gainers & Losers

Alstom SA, the power and rail engineering group fell 0.4% to €36.70.

Areva SA fell 0.2% to €333.05 after the uranium miner together with AMEC and Balfour Beatty in the HALEF Partnership has been awarded a contract by Sellafield Limited for a effluent storage facility project.

BASF SE fell 0.7% to €43.50 after the chemical company has grown annually by 3% and according to projections by experts will account for four million metric tons by 2010.

Bayerische Motoren Werke AG, the automobile manufacturer rose 1.2% to €38.31.

CNP Assurances SA fell 2.2% to €54.76 after the personal insurance provider’s shareholders approved the tenth resolution authorizing a four-for-one stock split.

Commerzbank AG, the bank fell 0.5% to €5.89.

Deutsche Telekom AG rose 1.3% to €9.66 after the integrated telecommunications provider upgraded its recommendation at Credit Suisse Group AG.

Electricite de France SA, the integrated energy operator fell 0.4% to €30.48.

Infineon Technologies AG, the chipmaker fell 0.8% to €4.78.

Manz Automation AG rose 1.3% to €44.39 after the solar-cell maker was upgraded to “neutral” from “underweight” at HSBC Holdings Plc.

Natixis SA fell 1.2% to €3.38 after the French bank announced today the disposal of most of the complex credit derivative exposure held in the structured investment portfolio to a banking counterpart.

PSA Peugeot Citroen SA rose 0.7% to €21.01 after the automaker completed the partial buyback of 2001 bonds due in September 2011, for an amount of €245 million.

Siemens AG, the electrical engineering contractor rose 0.5% to €71.95.

Total SA, the integrated international oil and gas company fell 0.1% to €36.12.