European Indexes Decline for Second Day

Arthi Gupta
20 Aug, 2010
New York City

The European indexes declined more than 1% for the second day in a row as the U.S. struggles with jobs market recovery and Europe faces slower economic rebound. The EU Commission noted Greece met the conditions for second loan installment of

[R]4:00 PM Frankfurt – The European indexes declined more than 1% for the second day in a row as the U.S. struggles with jobs market recovery and Europe faces slower economic rebound. The EU Commission noted Greece met the conditions for second loan installment of €110 billion aid.[/R]

U.S. and Asian markets slipped. German leading index rose but coincident index remained flat in June. Dutch consumer spending increased in June. Riksbank''s Öberg noted Swedish economy developing but inflation expected to rise.

In Paris CAC 40 Index decreased 41.20 or 1.15% to close at 3,531.20 and in Frankfurt DAX Index edged lower 52.53 or 0.86% to close at 6,022.60.

The Basel Committee on Banking Supervision said all the regulatory capital instruments held by banks should be written-off or converted to common shares in the event that a bank is unable to support itself in the absence of such conversions.

A committee of financial regulators and banking supervisors proposed new rules to limit the amount of money it costs governments to bailout failed banks. The committee said it was important that all regulatory capital instruments are able to absorb losses when a bank is insolvent.

""The proposal is an important element of finalizing the committee''s package of measures to strengthen the resilience of the banking sector,"" the Basel Committee said in a consultative paper.

The European Commission said on Thursday that Greece met the conditions to receive the second tranche of the €110 billion rescue package.

The Economic and Monetary Affairs Commissioner Olli Rehn stated, ""Greece has managed impressive budgetary consolidation during the first half of 2010 and has achieved swift progress with major structural reforms.""

Greece already received its first tranche worth €20 billion after the International Monetary Fund and the European Union jointly announced the €110 billion rescue package in May this year.

Euro area finance ministers are expected to approve the second tranche of €9 billion, when they meet in Brussels on September 7. The EU will contribute €6.5 billion and the IMF €2.5 billion.

The Commission urged Greece to speed up efforts to improve the collection and processing of data which are essential for budgetary control.

Germany''s leading economic index rose 0.9% and the coincident economic index remained unchanged in June, the Conference Board said today.

Five of the seven components in leading economic index for Germany improved in June. New orders in investment goods industries and the yield spread continued to make very large positive contributions to the index.

Dutch household spending rose at a faster annual pace in June than in May led by higher consumption of food and passenger cars, according to figures released today.

The Central Bureau of Statistics said consumer spending rose 1.3% year-on-year in June compared to a 0.8% increase in May.

Expenditure on food, beverages & tobacco were more than 3% higher than a year ago. Durable goods sales advanced 5%, led by a strong increase in passenger car sales.

The Swedish economy is developing strongly after the deep recession, Riksbank First Deputy Governor Svante Öberg said today.

""GDP was expected to grow relatively quickly over the coming years, and the labor market was expected to improve,"" Öberg said in a speech delivered at Swedbank, Stockholm.

He said the central bank in its most recent monetary policy meeting held in June raised the repo rate to 0.50% from 0.25%. Further, the central banker said inflationary pressures are currently low, but inflation is expected to rise as resource utilization increases.

Ratings agency Fitch placed BHP Billiton on negative watch, citing its $39 billion hostile offer for Canada''s fertilizer producer Potash Corp.

South Korea''s National Oil Corp is set to announce a £1.67bn hostile takeover bid for the UK''s Dana Petroleum Plc, reports suggest.

Gainers & Losers

Mitchells & Butlers Plc dipped 0.14% to 295.40 pence after the operator of managed pubs and pub restaurants announced that it intends to dispose 333 non-core pubs for a cash consideration of £373 million to Stonegate Pub Company, a company controlled by TDR Capital LLP.

European Aeronautic, Defence & Space Co. NV fell 1.62% to €17.92 after the company’s shares were downgraded to “neutral” from “buy” by Nomura Holdings Inc.

Hi-Media SA soared 3.59% to €3.17 after the advertising management company said German companies Bigpoint and Turtle Entertainment placed orders for its micropayment product Allopass.

Thales SA rose 0.94% to €25.67 after the maker of defense electronics was raised to “buy” from “neutral” at Nomura Holdings Inc.

Valeo SA slumped 2.57% to €27.52 after the vehicle parts maker confirmed that investment group Pardus Capital Management will cut its stake to about 5% next month.