European Indexes Fall; Euro-zone Inflation Rises

Arthi Gupta
16 Aug, 2010
New York City

The European indexes declined after a fall in financial stocks. Euro-zone inflation rose 1.7% in July. Moody''s rated negative outlook for Slovakia''s banking system and industrial new order growth eased in June. Italy current account deficit narrowed in June.

[R]4:00 PM Frankfurt – The European indexes declined after a fall in financial stocks. Euro-zone inflation rose 1.7% in July. Moody''s rated negative outlook for Slovakia''s banking system and industrial new order growth eased in June. Italy current account deficit narrowed in June.[/R]

U.S. and Asian markets dropped after weaker-than-estimated second quarter GDP data from Japan.

China surpassed Japan after Japan reported second quarter GDP at $1.28 trillion, lower than the $1.33 trillion GDP in China. China is expected to maintain 10% growth rate in the current year and Japan is estimated to expand at less than 1%.

China after rapid growth of double digits in the last three decades is also the largest exporter in the world and the largest passenger car market.

In Paris CAC 40 Index dropped 36.89 or 1.02% to close at 3,574.02 and in Frankfurt DAX Index edged lower 26.39 or 0.43% to close at 6,084.02.

The Cabinet Office in Japan stated gross domestic product grew 0.1% in the second quarter of 2010 compared to a revised 1.1% growth in the first quarter. On an annualized basis, GDP for the quarter rose 0.4%, compared to a 4.4% annualized growth in the first quarter. The report further noted that nominal GDP declined 0.9% on quarter and 3.7% on annualized basis.

Vedanta Resources Plc agreed to acquire 51% to 60% of Cairn India Limited, a unit of Cairn Energy Plc for an aggregate consideration of about $8.5 billion to $9.6 billion in cash.

National Incident Commander Thad Allen on Saturday issued a directive to oil giant BP Plc to conduct more pressure testing on the busted well in the Gulf of Mexico ahead of plans to resume drilling of a relief well.

Euro-zone annual inflation increased in July on energy prices to the highest level since November 2008. The European Central Bank targets inflation rates of ''below, but close to, 2%'' over the medium term.

Annual consumer price inflation rose 1.7% in July from 1.4% in June, according to data released from the statistics office Eurostat today. Excluding volatile food and energy prices, core annual inflation increased 1% in July from 0.9% in June. On a monthly basis, consumer prices declined 0.3%.

Consumer price annual inflation in EU27 grew 2.1% in July as against 1.9% in June. On a monthly comparison, prices dipped 0.2%.

The outlook for Slovakia''s banking system remains negative, reflecting the ongoing pressures on the banks'' financial and credit fundamentals and the uncertain economic environment, Moody''s Investors Service said today, in its new Banking System Outlook on Slovakia. According to Moody''s, the banking sector''s profitability was the weakest among its peers in 2009.

""While Slovakia''s economy and banking sector were not affected by the early stages of the crisis, the country''s GDP contraction in 2009 highlighted the country''s vulnerability to its main export markets,"" said Oscar Heemskerk, Moody''s lead analyst for Slovak banks.

Heemskerk further added, ""Any future change in the banking system outlook to stable will depend on more evidence of sustainability of the current economic recovery, which is unlikely to emerge before late 2010.""

Slovakia''s industrial new order growth slowed in June, but remained robust, according to data released by the Statistics Office of the Slovak Republic today.

New orders rose 30.1% year-on-year in June, following a 41.8% surge in May. Month-on-month, orders rose a seasonally adjusted 1.3% in June, after a 2.1% gain in the previous month.

The central bank estimates the economy to expand 3.7% in 2010. For 2011, the central bank projects 4.3% growth.

Italy’s current account deficit narrowed to €2.7 billion in June compared to €4.9 billion deficit in the same month the previous year, according to a report published by the Bank of Italy today.

The goods account deficit rose to €1.1 billion from €0.1 billion in the previous year. At the same time, the services account turned to a surplus of €1.2 billion from a €0.2 billion deficit in the preceding year.

Danish producer prices increased in July, according to a report released by the Statistics Denmark today.

The producer price index rose 5.7% year-on-year in July after the domestic produced goods prices increased 4.7% and imported goods prices grew 6.4%.

The industrial price index increased 4.6% on an annual basis in July and was up 0.7% compared to the preceding month.

Gainers & Losers

GfK SE rose 2.61% to €28.73 after the provider of market research services said second-quarter net income surged 52.7% to €22 million from €14.4 million.

Hennes & Mauritz AB soared 4.43% to 238.20 kroner after the Swedish clothing retailer reported a 10% rise in like-for-like sales in July.

Hochtief AG increased 4.5% to €51.87 after Germany’s largest construction company predicted overseas expansion will help its order book grow this year. The company further added sales will be similar to last year and pre-tax profits will rise slightly.

Santhera Pharmaceutical Holding AG surged 7.9% to Sfr9.50 after the Swiss company focused on discovery, development and commercialization of small-molecule pharmaceutical products received patent protection for its Catena medicine.