European Markets Reversed Earlier Losses

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

The European markets reversed earlier losses tracking gains in the U.S. indices. The ECB notes the euro-zone economy estimated to grow moderately. European new car registrations drop in June. Riksbank observes euro-zone fiscal policy tightening will impact economic growth in Sweden.

[R]4:00 PM Frankfurt – The European markets reversed earlier losses tracking gains in the U.S. indices. The ECB notes the euro-zone economy estimated to grow moderately. European new car registrations drop in June. Riksbank observes euro-zone fiscal policy tightening will impact economic growth in Sweden.[/R]

U.S. equities rose boosted by JPMorgan’s 76% increase in earnings and Asian stocks fell after the Federal Reserve cut its growth forecast for the U.S economy and a slowdown in economic growth in China.

In the minutes of its June policy meeting released on Wednesday, the Federal Reserve stated that the economic recovery is softer than initially expected, although not enough to warrant additional quantitative easing. The Fed also revised downwards its growth and inflation forecasts for 2011 and 2012 while forecasting a higher unemployment rate in 2011.

The FOMC said that the downward revision to its growth forecast reflects ""intensifying concerns among investors about the implications of the fiscal difficulties faced by some European countries.""

Spain successfully sold 15-year bonds worth €3 billion today. The latest sale follows after Greece sold Treasury bills on Tuesday for the first time since activating the E.U. / IMF bailout deal. Portugal and Italy have also held successful bond auctions this week.

The euro-zone economy is likely to grow at a ""moderate and uneven"" pace while inflationary pressures in the 16-nation bloc remain contained, according to the European Central Bank.

In its latest monthly bulletin, the ECB said the risks to the euro area''s economic outlook are ""broadly balanced, in an environment of high uncertainty."" On the upside, it said the global economy and foreign trade may recover stronger than expected, while on the downside, tension in the financial markets could increase further, dampening confidence.

The central bank also said that it expects inflation to remain moderate in this year and the next due to low domestic price pressures.

The ECB reaffirmed that its bond purchases are ""fully consistent"" with its mandate, and temporary in nature.

Piraeus Bank, a private bank in Greece is contemplating buying stakes in state-controlled ATEbank and Hellenic Postbank from the government for €701 million or $890.5 million.

Michalis Sallas, the CEO said the bank is bidding to acquire 77.3% of ATEBank and 33% of Postbank.

Sallas said the proposed deal would create the country''s largest banking group with assets worth more than €105 billion or $133.5 billion.

""This is a proposal which we believe will be beneficial to Greek society, the banks themselves, the state and the general atmosphere so that we can escape this atmosphere of gloom,"" Sallas said.

""The decision is not mine. It is up to the government to study this proposal and make its decision.""

Finance Minister George Papaconstantinou, speaking in parliament Wednesday, said there was an ""urgent need"" for Greek banks to consider mergers.

European new car registrations declined for the third consecutive month in June, according to data from European Automobile Manufacturers'' Association released today. Car registrations dipped 6.9% in June from the previous year, following a 9.3% fall in May. Registrations totaled 1,341,092 units.

During January to June, EU registrations rose 0.2% over the same period of a year ago.

Fiscal policy tightening in euro-zone is likely to hold back economic growth and inflation in Sweden in the long run, the Riksbank said today.

According to minutes of the June 30 executive board meeting, when the central bank raised the repo rate by 0.25 percentage points to 0.5%, policymakers assessed that the Swedish economy is developing strongly following the severe downturn.

At the same time, economic growth abroad is expected to be lower, which means that the repo rate in the longer term will not need to be raised as much as was previously assumed. But, the repo rate now needs to be raised gradually towards more normal levels to attain the inflation target of 2% and to ensure stable growth in the real economy, minutes said.

GlaxoSmithKline Plc confirmed that a joint advisory committee to the U.S. Food and Drug Administration voted to allow the company''s diabetes drug Avandia or rosiglitazone maleate to remain in the market.

Italian lender Banca Monte dei Paschi di Siena SpA is likely to withstand the European stress tests and there is no need for a capital hike, its Chief Executive Officer Antonio Vigni reportedly said in an interview.

Evotec AG, the biotechnology company signed an agreement to buy biopharmaceutical discovery and development firm DeveloGen for €14 million.

Europe Markets Review

In London FTSE 100 Index traded higher 0.54 or 0.01% to 5,254.06, in Paris CAC 40 Index increased 7.65 or 0.21% to 3,640.63 and in Frankfurt DAX index traded higher 18.70 or 0.30% to 6,228.46. In Zurich trading SMI increased 6.95 or 0.11% to 6,339.23.