European Markets Up; Latvia Aid of

Arthi Gupta
21 Jul, 2010
New York City

The European markets rose after Apple Inc. reported quarterly earnings growth of 78%. Fitch Ratings expresses concern over European funding conditions. The Swiss National Bank estimates loss in euro investments in the first half of 2010. EU is close to finalizing an aid of

[R]4:00 PM Frankfurt – The European markets rose after Apple Inc. reported quarterly earnings growth of 78%. Fitch Ratings expresses concern over European funding conditions. The Swiss National Bank estimates loss in euro investments in the first half of 2010. EU is close to finalizing an aid of €200 million to Latvia.[/R]

U.S. and Asian markets rose after encouraging earnings from Apple Inc. French Finance Minister Christine Lagarde expressed her confidence that domestic banks will outperform in the stress tests.

Swiss M3 money supply increases in June. German Finance Minister Wolfgang Schaeuble stresses for modifications in the EU Treaty.

In Paris CAC 40 Index increased 61.22 or 1.76% to close at 3,529.24 and in Frankfurt DAX Index edged higher 70.01 or 1.18% to close at 6037.50.

Fitch Ratings on Tuesday expressed optimism that capital will be made available by governments where the stress tests of European banking groups indicate shortfalls either through existing national bank recapitalization schemes, or directly.

A total of 91 banks across Europe are tested to assess whether they will be able to withstand future shocks in the financial sector. The results of the stress test will be published on July 23.

According to Fitch, more of a concern is that conditions in European funding markets remain difficult for some banks. For those banks most exposed to wholesale refinancing risk, pressure on their individual ratings and long-term issuer default ratings is likely to intensify if conditions in the wholesale funding markets do not improve in the aftermath of the test results being published.

French Finance Minister Christine Lagarde reiterated that domestic banks will perform well in the stress tests. According to excerpts of an interview published on French daily Le Figaro today, Lagarde said she is ""totally confident"" about the stress test results of French banks.

The Swiss National Bank estimated a CHF 4 billion loss on huge euro-denominated investments in the first half of 2010. In a statement, the central bank said it has increased its foreign currency investments by CHF 132 billion in the first half of 2010, with the bulk placed in euro-denominated investments. It noted that the income from foreign currency and Swiss franc positions and the steep rise in the price of gold limited the extent of loss to an estimated CHF 4 billion.

Switzerland''s M3 money supply including M2 and time deposits edged higher 7.7% year-on-year in June compared to a 7.5% rise in May, according to a report by the Swiss National Bank released today.

The M2 money supply grew 11.4% annually in June, compared to a 10.4% growth in the previous month.

The European Union will provide a €200 million aid to Latvia this September to support its public finances.

Monetary Affairs Commissioner of the EU, Olli Rehn said on Tuesday that the aid package had been agreed upon following the completion of the third review mission of the country''s progress, in cooperation with the International Monetary Fund.

""I am glad that the program is on track, financial conditions have largely stabilized and the economic situation is showing signs of improvement,"" said Rehn. ""However, the budget deficit is still very high and the debt level is increasing rapidly, thus calling for significant consolidation in 2011.""

German Finance Minister Wolfgang Schaeuble said moderate reductions in a country''s budget deficit will not harm economic growth, instead it will stimulate growth.

In an interview with French financial daily Les Echos, published today, Schaeuble said EU''s fiscal stability pact should be more effective than it is today and a more efficient monitoring system is needed.

Schaeuble said the EU treaty may have to be amended. ""It is clear that we must also make other proposals, possibly by agreeing to amend the Treaties,"" he said.