European Indexes Declined on German Orders

Arthi Gupta
07 Sep, 2010
New York City

The European indexes fell after German factory orders slid in July. Ten largest German banks may need to raise as much as

[R]4:00 PM Frankfurt – The European indexes fell after German factory orders slid in July. Ten largest German banks may need to raise as much as €105 billion in capital to meet revised Tier 1 capital ratios. Swiss unemployment rate was flat at 3.6% in August. Czech current account deficit widened in the second quarter.[/R]

U.S. and Asian markets declined while the European stocks slumped.

Fresh worries of the health of European Banking systems raised doubts over Europe''s ""stress tests"" on major banks. In July, the results of the stress tests showed all but seven European lenders out of 91 banks were strong enough to withstand future financial crises.

Analysts have been worried that banks capital has included sovereign debts of nations that are struggling and may fall further.

A report from the Association of German Banks estimated that Germany''s ten largest lenders, including Deutsche Bank AG and Commerzbank AG, will need an additional €105 billion in capital to meet revised Tier 1 capital ratios.

The policy board of the Bank of Japan, led by Governor Masaaki Shirakawa decided to leave the uncollateralized overnight call rate unchanged at 0.10% and pledged to maintain an extremely accommodative financial environment.

Barclays plc, the British financial services firm announced today the appointment of Robert Diamond Jr. as its Chief Executive Officer, succeeding John Varley, who is scheduled to end his term as CEO on March 31, 2011. Diamond, who is currently President and Head of its investment banking unit, would become Deputy Group Chief Executive from October.

In Paris CAC 40 Index decreased 41.78 or 1.13% to close at 3,642.95 and in Frankfurt DAX Index edged lower 38.48 or 0.63% to close at 6,116.56.

The European Commission President Jose Manuel Barroso said in his first ""State of the Union"" address that the economic recovery in the European Union was ""gathering pace,"" although unemployment was ""still too high.""

He further added while addressing MPs in Strasbourg, France that ""the economic outlook in the European Union today is better than one year ago, not least due to our determined action. The recovery is gathering pace, albeit unevenly within the union. The unemployment rate, whilst still much too high, has stopped increasing.""

Hiring expectations in emerging markets continued its upward trend for the fourth quarter, while confidence remained mixed in Europe, the quarterly Employment Outlook Survey published by the employment services provider Manpower showed today.

The survey noted among the U.S. employers, hiring plans are stronger than a year ago level. Furthermore, the report suggested hiring expectations remain mixed in the 18 countries surveyed in the Europe, Middle East and Africa region, similar to the third quarter. However, hiring activity in the region is expected to be strongest in Switzerland, Norway and Poland and weakest in Greece and Italy.

A new paradigm for international cooperation is required from global policy-makers, the European Central Bank Executive Board member Lorenzo Bini Smaghi said today.

""Strengthening international cooperation in the global economic and financial sphere is crucial,"" Bini Smaghi said in a speech in Beijing. ""The key challenge faced by global policy-makers is to make the system safer and avert future crises,"" he added.

German factory orders logged its biggest fall since February 2009 and declined 2.2% month-on-month in July after recording a revised 3.6% increase in June, the Federal Ministry of Economics and Technology said today. On a yearly basis, factory orders after adjusting working days increased 17.7% compared to the 24.7% growth in June.

Export orders dropped 3.7% during July. This decline was largely led by a 6.1% drop in demand from euro-zone. Domestic demand slipped 0.3% in July, following a 0.1% rise in June.

The UK retail sales rose 1% compared to the same period a year ago on a like-for-like basis in August, driven by back to school shopping and new autumn and winter clothing ranges, the British Retail Consortium said today.

Switzerland''s unemployment rate was unchanged at 3.6% in August, while the number of unemployed persons increased modestly, according to official figures released today.

The State Secretariat for Economic Affairs said around 142,900 were registered unemployed at the end of August, nearly 550 more than July. Compared to the same month a year ago, the number of unemployed had fallen by around 8,000 persons.

Hungary''s trade surplus narrowed to €240.7 million in July from €328 million a year ago, the Hungarian Statistics Office said today.

Exports increased 17.7% year-on-year to €5.86 billion in July, while imports rose 20.8% to €5.62 billion.

Greek annual consumer price inflation year-on-year remained flat at 5.5% in August, unchanged from July, the Hellenic Statistics Authority said today. On a monthly basis, consumer prices declined 0.7% in August, compared to the 0.5% decrease in July.

Prices of food and non-alcoholic beverages grew 2.2% annually during the month, while prices of alcoholic beverages and tobacco increased 19.3%. Clothing and footwear prices rose 0.6% and transport and communication charges were up 16.6%.

The harmonized index of consumer prices rose 5.6% on an annual basis in August as against a 5.5% rise in June. From the previous month the index fell 0.7% compared to a 0.4% fall in July.

Norway''s consumer sentiment improved in the third quarter, according to data released by the Finance Norway and survey group TNS Gallup today. The consumer confidence index rose to 22.7 in the third quarter compared to 18.5 in the second quarter.

The Swedish National Debt Office announced its intention to start unwinding its krona position for a stronger currency, depending on the prevailing market conditions. The unwinding of its position, which is equivalent to SEK 50 billion, will take up to a year, the agency said in a statement.

""We believe that the Swedish krona could appreciate further from these levels, though we consider the current levels to be relatively normal,"" the debt office said.

The Czech current account balance showed a deficit of CZK 29.51 billion in the second quarter, widening from CZK 19.08 billion deficit in the previous quarter, according to a report by the Czech National Bank published today.

Gainers & Losers

Air Liquide SA dropped 0.51% to €86.44 after the company engaged in the supply of oxygen, nitrogen, hydrogen and other gases signed a long-term contract with 3Sun, a manufacturing joint venture that produces solar panels in Sicily, to supply gases and services to the company.

Nokia Oyj gained 2.32% to $9.25 after the world''s largest cellphone maker was raised to “overweight” from “underweight” at Morgan Stanley.

OceanFreight Inc. surged 6.45% to $0.99 after the provider of shipping transportation services reported voyage revenues for the second quarter declined 17.5% to $24.0 million from $29.1 million in the year-ago quarter. Net loss in the quarter narrowed 98% to $0.8 million or 1 cent per share as against net loss of $32.8 million or $1.54 per share from in the prior-year quarter.

Stallergenes S.A. rose 2.16% to €60.99 after the biopharmaceutical company signed an exclusive partnership agreement with Shionogi & Co. for the marketing of two sub-lingual allergen immunotherapy tablet products in Japan.

Vinci S.A. decreased 1.34% to €36.71 after the French builder won a €264 million contract to build an underground car park and landscaped gardens in the Centre of Doha, Qatar.