Euro-zone GDP Expands 1%; Rate on Hold

Arthi Gupta
02 Sep, 2010
New York City

The European indexes fell after the ECB left key rate unchanged at 1%. Euro-zone GDP expanded 1% in the second quarter and wholesale inflation rose 0.2% in July. French unemployment rate declined 9.3% in the second quarter. Sweden raised interest rates to 0.75%.

[R]4:00 PM Frankfurt – The European indexes fell after the ECB left key rate unchanged at 1%. Euro-zone GDP expanded 1% in the second quarter and wholesale inflation rose 0.2% in July. French unemployment rate declined 9.3% in the second quarter. Sweden raised interest rates to 0.75%.[/R]

U.S. stocks traded sideways and Asian markets gained.

Spanish unemployment rose in August and Swiss GDP expanded 0.9% in the second quarter and retail sales improved in July.

In Paris CAC 40 Index increased 8.37 or 0.23% to close at 3,632.21 and in Frankfurt DAX Index edged higher 0.57 or 0.01% to close at 6.084.47.

The European Central Bank left its key interest rate unchanged at a record low of 1% for the sixteenth straight month.

The last change in the key interest rate was in May 2009, when the bank cut the rate by 25 basis points to the current level of 1%. The bank has lowered the key interest rate by a total of three and a quarter percentage points since early October 2008.

The central bank also retained its interest rate on the marginal lending facility at 1.75% and that on the deposit facility at 0.25%.

According to the preliminary data released by the European Union statistics office Eurostat today, the euro area economic growth in the second quarter was 1% on a sequential basis.

The agency confirmed the flash estimate issued on August 13. In the first quarter, the economy had expanded 0.3%.

Compared with the second quarter of 2009, seasonally adjusted GDP for the euro-zone increased 1.9%. The EU27 also expanded 1% on a quarterly basis and 1.9% annually.

Euro-zone producer price index increased 4% year-on-year in July as against 3% in June, according to data published by Eurostat today. Month-on-month, the PPI rose 0.2% in July compared to 0.3% in June.

In EU27, factory prices grew 4.4% year-on-year in July after rising 3.5% in June. On a monthly basis, the increase was 0.2% in July following June''s 0.3% rise.

French unemployment rate fell 9.3% in the June quarter from 9.5% in the March quarter, according to a report released by the Statistics office Insee today.

The male unemployment rate slipped to 9.1% from 9.3%, while the female unemployment rate dropped to 9.4% from 9.7%.

The Swedish central bank decided to raise interest rates by a quarter percentage point to 0.75% at the end of its two-day monetary policy meeting. The bank cited higher exports and falling unemployment for the rate rise.

The Riksbank also raised its 2010 growth forecast for the Swedish economy to 4.1% from 3.8%, noting strong domestic economic conditions.

The bank lowered its inflation forecast for this year to 1.1% from 1.2%, while the projection for next year was lowered to 1.9% from 2%. Inflation is expected to average 2.5% in 2012.

The number of unemployed in Spain increased 1.5% month-on-month in August to 3.97 million, according to data released from the Labor Ministry today. Compared to July, the number of unemployed persons increased by 61,083.

Unemployment among males climbed 1.8% in August from July and among females, unemployment was 1.3% higher in August than in July. Year-on-year, male unemployment rose 8.4% and female unemployment increased 10.3% in August.

Switzerland''s economy grew more than expected in the second quarter, boosted by companies'' investment.

Switzerland''s economy grew 0.9% sequentially in the second quarter as against a 1% growth in the first quarter, the State Secretariat for Economic Affairs said today.

Swiss retail sales grew by a real 0.7% in July reversing a 0.1% fall in June, the Federal Statistics Office said today. In nominal terms, sales recorded 0.6% monthly growth in July compared to a fall of 0.7% in June.

Gainers & Losers

Deutsche Bank AG plunged 3.50% to €49.19 after the global investment bank was added to its list of “least preferred” stocks by BofA Merrill Lynch Global Research today.

Evraz Group S.A. slumped 3.08% to $26.43 after the company involved in production and distribution of steel and related products said first-half revenue increased 37.5% to $6.38 billion from $4.64 billion in the comparable period. Net loss in the period narrowed 73% to $270 million or $1.93 per share as against net loss of $999 million or $7.55 per share in the previous year.

GAM Holding Ltd. rose 2.65% to Sfr13.55 after the company engaged in asset management business was raised to “buy” from “hold” at Helvea SA Research.

Wimm-Bill-Dann Foods OJSC gained 1.60% to $19.10 in New York trading after the Russian dairy producer reported second quarter sales improved 15.4% to $639.8 million from $554.6 million in the year-ago quarter. Net income in the quarter declined 31.5% to $35.9 million from $52.3 million in the prior-year quarter.

For the first-half of the year, net income grew 7.1% to $69.53 million or $1.68 per share from $64.94 million or $1.50 per share in the same period last year. Sales increased 17.1% to $1.255 billion from $1.072 billion in the previous year.

OAO Gazprom rose 0.53% to R162.65 after the Russian energy company reported first quarter sales rose 14% to R 956.81 billion from R 837.15 billion last year. Net profit in the quarter surged 206% to R 336.84 billion from R 110.17 billion last year.

Pernod Ricard S.A. dropped 2.87% to €60.94 after the France-based producer and distributor of spirits and wines reported fiscal year 2010 net sales fell 2% to €7.08 billion from €7.20 billion in the prior year period. Profit for the period rose 1.2% to €978 million from €966 million last year.

Yara International ASA slumped 2.77% to DKK248.80 after Morgan Stanley downgraded the shares to “equal weight” from “overweight.”