Euro Surplus Soars, Switzerland Holds Rates

Arthi Gupta
16 Sep, 2010
New York City

The European indexes fell after euro area trade surplus surged in July. The EU proposed stringent measures to curb short selling. Private estimate of Swiss growth in 2010 was revised higher and Swiss central bank retained its key interest.

[R]4:00 PM Frankfurt – The European indexes fell after euro area trade surplus surged in July. The EU proposed stringent measures to curb short selling. Private estimate of Swiss growth in 2010 was revised higher and Swiss central bank retained its key interest.[/R]

U.S. and Asian markets declined.

Greek jobless rate climbed in the second quarter. Spain labor costs rose in the second quarter. Swedish jobless rate fell significantly in August.

In Paris CAC 40 Index decreased 15.63 or 0.42% to close at 3,740.01 and in Frankfurt DAX Index edged lower 7.71 or 0.12% to close at 6,254.16.

The European Union’s executive arm on Wednesday unveiled ambitious proposals for regulating short selling and credit default swaps as part of its efforts to curb excessive risk taking on trading in complex financial products. Under the new proposals, all trades that involve short selling will have to be disclosed by investors to a central database.

Michel Barnier, the European Commission''s internal market and services commissioner, said: """"""""In normal times, short selling enhances market liquidity and contributes to efficient pricing. But in distressed markets, short selling can amplify price falls, leading to disorderly markets and systemic risks.”

The euro-zone''s trade balance recorded a large surplus in July as the fall in imports outpaced that of exports, according to official figures released today.

The unadjusted surplus was at €6.7 billion in July, compared with the €2.2 billion surplus in June. The reason was a 1.5% fall in imports from June, compared with a 0.6% dip in exports.

The official figures from Eurostat also showed a €5.7 billion trade deficit in July as against the €9.7 billion deficit in June for the 27-nation European Union.

A separate report from the European Automobile Manufacturers'' Association showed that European new car registrations declined for the fifth consecutive month in August. Car registrations decreased 12.9% in August from the previous year, following an 18.6% fall in July. Registrations totaled 701,710 units. Car registrations dropped in France, UK, Italy, Spain and Germany.

During January to August period, EU registrations dropped 3.5% compared to the same period of the previous year. The new cars registration in the EU was 9,021,703.

Germany''s RWI institute on Wednesday upwardly revised its growth forecast for this year and the next, saying that the improved expectations are backed by unexpected strong growth in the second quarter. The think-tank lifted the GDP growth forecast to 3.4% this year from 1.9% estimated in June. For 2011, the institute predicts 2.2% expansion, up from 1.7% predicted in June.

Greece''s unemployment rate rose modestly to 11.8% in the second quarter, from 11.7% in the previous three months, according to data from the Hellenic Statistics Authority published today. A year ago, the rate was 8.9%.

The unemployed increased to 594,032 for the second quarter, up 1.2% from the first three months of the year, an increase of 34.2% from the same quarter last year.

Sweden''s unemployment rate declined more than expected during August, according to official data. The non-seasonally adjusted jobless rate declined 7.4% in August, as against 8% in July, Statistics Sweden said. Unemployed persons were 370,000 in August compared to the same month last year

On a seasonally adjusted basis, the unemployment rate was 8.2% for August and 407,000 unemployed during the month.

Switzerland''s State Secretariat for Economic Affairs upwardly revised its growth estimate for 2010. The economy is now projected to grow 2.7% in 2010, up sharply from the previous estimate of 1.8%. The upward revision is due to the stronger than estimated economic recovery up to the middle of the year, SECO said.

The expert group downgraded the growth estimate for 2011 to 1.2% from 1.6%. Export is expected to lose momentum in 2011 compared to 2010, while domestic demand is likely to be insufficient to compensate for the weaker stimulus from exports.

The Swiss National Bank retained its key interest. The central bank left the target range for the three-month Libor unchanged zero and 0.75% and intends to keep the Libor within the lower part of the target range at around 0.25%.

The central bank lowered its inflation forecast for 2010 to 0.7% from 0.9%. For 2011, average inflation is seen at 0.3%, sharply down from the previous estimate of 1% and it is projected to rise to 1.2% in 2012.

For 2010, the SNB said real GDP is estimated to grow at a rate of approximately 2.5%. This was higher than the previous forecast of 2%.

Switzerland''s industrial production increased in the second quarter from the previous year, according to a report released by the Swiss Federal Statistics Office today.

Industrial output increased 7.8% on an annual basis in the second quarter, compared to 5.1% in the first quarter. Industrial turnover rose 5.2% in the second quarter from 2.6% in the first quarter. Sequentially, output increased 0.3% in the second quarter.

The cost of labor per worker per month in Spain was around €2,600 between April and June, representing an increase of 1.2% over the same period of 2009.

Statistics office INE said the wage cost index increased 1.8% year-on-year to just over €1,900 per worker per month. Excluding bonuses and extra payments, wage costs rose 0.4%.

Manufacturing recorded the highest growth in labor costs during the June quarter, while construction registered the smallest increase.

Gainers & Losers

Club Mediterranee SA rose 1.17% to €13.84 after the vacation club operator announced the sale of its 3-Tridents resort in Sestriere, Italy.

Etablissementen Franz Colruyt NV fell 0.68% to €197.40 after the Belgian supermarket chain forecasts that its net profit in the current financial year would rise by 5% to €346 million.

Genmab A/S slumped 3.20% to DKK60.50 after the Danish biotechnology firm said the company and its partner GlaxoSmithKline plc will continue their development of ofatumumab in multiple oncology indications with the intravenous administration.

Intercontinental Hotels Group Plc dropped 1.07% to 1,106.00 pence after the hotel chain operator announced the opening of the 180 room InterContinental Mendoza located in the heart of Argentina''s wine country.

JCDecaux SA decreased 0.74% to €20.03 after the outdoor advertising company said it won a 25-year bill board contract in the city of Almaty, Kazakhstan.

Vallourec SA gained 0.56% to €71.63 after the specialty steel maker agreed to acquire a 19.5 % stake in Chinese seamless tube maker Tianda Oil Pipe Co. for $100 million.

UniCredit SpA edged lower 1.54% to €1.98 after the Italian lender announced the appointment of two managing directors within its London-based EEMEA equity sales team.