Euro Area Growth Slows; Money Supply Soars

Arthi Gupta
27 Sep, 2010
New York City

The European indexes fell after euro-zone growth slowed but private sector credit and money supply growth increased. IMF approved

[R]4:00 PM Frankfurt – The European indexes fell after euro-zone growth slowed but private sector credit and money supply growth increased. IMF approved €884 million loan for Romania. Hungary retained key rate at 5.25%. Nestlé formed group to develop personalized health science nutrition.[/R]

Indexes in Europe declined tracking the early weakness in New York trading but markets in Asia rose after better than expected U.S. business orders data released on Friday.

The ECB President Trichet urged reevaluation of the role of financial markets. Swedish trade balance deficit at record levels in August.

In Paris CAC 40 Index gained 2.96 or 0.08% to close at 3,785.44 and in Frankfurt DAX Index edged higher 5.84 or 0.09% to close at 6,304.14.

The European Central Bank President Jean-Claude Trichet said it is important to ""re-evaluate"" the understanding of the role of financial markets to form a successful macroprudential regulatory system.

""A considerable intellectual and policy challenge lies before us,"" Trichet said at an ECB conference in Frankfurt. ""We have to re-evaluate our understanding of the nature of risk of market disruptions. We have to re-evaluate our understanding of the role of financial markets in our economies and societies. And we have to re-evaluate our understanding of the very nature of financial markets, which have shown themselves at times to be far less efficient and far less atomistic than they are often perceived. ""

In another report, central bank member Gertrude Tumpel-Gugerell said in a conference in Frankfurt today that the European Central Bank will continue its active role in ensuring stability in the European financial system.

Tumpel-Gugerell added that the current three major regulatory challenges are in the field of classic bank regulation, market and infrastructure regulation, and systemic risk regulation.

The International Monetary Fund on Friday approved around €884 million or $1.19 billion loan for Romania and also waived certain performance criterion. The latest sixth installment of loan took the total disbursements under the Stand-By Arrangement to €11.27 billion.

The Organization for Economic Cooperation and Development said today that credible fiscal consolidation and fast implementation of relevant measures are vital for restoring investor confidence in the Portuguese economy.

""It is essential that the announced consolidation measures continue to be implemented as planned, even if cyclical developments turn out more adverse than now expected,"" the OECD report said. ""The immediate challenge is to gain investor confidence by reinforcing Portugal''s public finances.""

The euro-zone''s leading economic indicator rose 0.4% in August compared to a 0.8% increase in July, the Conference Board said today.

Loans to euro-zone firms and households increased in August at the fastest pace since June 2009 and the growth in broad money supply improved more than expected.

Total credit extended to euro area residents rose 2.2% annually, from a 1.8% increase in July, according to data from the European Central Bank released today. While, the annual rate of growth of credit granted to general government eased to 7.4% in August from 7.7% in July, growth in credit to the private sector increased to 1% in August from 0.6% in July.

Euro-zone M3 money supply recorded an annual growth of 1.1% in August, following a 0.2% rise in July, data from the European Central Bank showed today.

The three-month average of the annual rates of change of M3 over the period June to August rose to 0.5%, from 0.1% in the period May to July.

The Hungarian Central Bank decided to leave its benchmark base rate unchanged at 5.25% during its monetary policy council meeting today.

Sweden''s interest rate should be lower in the coming years than the path projected by the central bank, Riksbank Deputy Governor Lars Svensson told a Swedish daily Svenska Dagbladet.

""I am surprised by disagreements about certain things that should be self-evident, for example, that one should not raise rates when the forecast for inflation and resource utilization is too low,"" said Svensson.

Sweden''s trade balance in August recorded its first deficit since 1994 as exports decreased and imports advanced from the previous month.

The trade balance showed a shortfall of SEK 2.8 billion in August after recording a surplus of SEK 10.2 billion in July, according to data from Statistics Sweden, released today. A year ago, the surplus was SEK 4.9 billion. Seasonally adjusted, the net trade surplus amounted to SEK 3.6 billion in August compared to SEK 4.3 billion in July.

Shipments in August climbed at a pace of 15% on an annual comparison to SEK 85.3 billion, while imports rose 27% to SEK 88.1 billion.

However, Statistics Sweden said today that on an annual basis, total lending to Swedish households grew 8.8% in August, at the same pace as in July.

The average interest rate for new loans to households with periods up to three months rose to 2.47% in August from 2.36% in July.

Central banks across the world and the International Monetary Fund sold the least amount of gold during the year ended September 26, under the Central Bank Gold Agreement, provisional data from the World Gold Council revealed on Monday.

Euro-zone central banks sold 6.2 tons during the year ended September. It was 96% lower than the previous year''s sale of 142 tons.

Unilever plc, the consumer products maker entered into an agreement to acquire U.S.-based personal care products maker Alberto-Culver Co. for $3.7 billion in cash and said the acquisition will be accretive to earnings per share in the first full year.

Nestlé S.A., the world''s largest food maker said it is creating two organizations - Nestlé Health Science S.A. and the Nestlé Institute of Health Sciences. The two organizations would allow the company to develop personalized health science nutrition to prevent and treat health conditions such as diabetes, obesity, cardiovascular disease and Alzheimer''s disease.

Nestlé Health Science will become operational on January 1, 2011. The new company will incorporate the existing global Nestlé HealthCare Nutrition business. The Nestlé Institute of Health Sciences will be part of Nestlé''s global R&D network.

Sopra GMT said it reinforced its shareholding in Sopra Group, engaged in the European consulting and IT services market, bringing the control of the founders and management to 34.6%.

Gainers & Losers

AstraZeneca PLC gained 1.90% to $52.69 after the biopharmaceutical company reported that a study evaluating zibotentan for the treatment of men with metastatic castration resistant prostate cancer did not show a significant improvement in the primary endpoint of overall survival.

LM Ericsson Telephone Co. fell 0.28% to $10.85 after the communications equipment maker said it entered into an asset purchase agreement to acquire Multi-Service Switch business from Nortel Networks Corp. for $ 65 million on a cash and debt free basis, subject to adjustments.

Nestlé S. A. rose 0.47% to Sfr52.95 after the global food maker decided to form two separate businesses.

Sanofi-Aventis SA declined 0.87% to €50.19.

Unilever plc increased 1.67% to $28.56 after the consumer products maker entered into an agreement to acquire U.S.-based personal care products maker Alberto-Culver Co. for $3.7 billion in cash.

Vivendi SA climbed 0.70% to €20.08 after the communications and entertainment conglomerate completed the sale of 7.7% of NBC Universal to General Electric for $2 billion. The company added that the remaining 12.34% stake will be sold for $3.8 billion to General Electric.