Euro Area Economic Confidence Rises

Arthi Gupta
29 Sep, 2010
New York City

The European indexes slid after euro-zone economic confidence rose in September. The EU proposed tougher sanctions on budget offenders. German inflation accelerated and French consumer sentiment climbed in September. Romania central bank retained key rate at 6.25%.

[R]4:00 PM Frankfurt – The European indexes slid after euro-zone economic confidence rose in September. The EU proposed tougher sanctions on budget offenders. German inflation accelerated and French consumer sentiment climbed in September. Romania central bank retained key rate at 6.25%.[/R]

Greek and Italian PPI slowed but Hungary''s PPI increased in August. Swedish consumer confidence soared in September and Spain’s retail sales declined in August.

In Paris CAC 40 Index declined 16.49 or 0.44% to close at 3,745.86 and in Frankfurt DAX Index edged lower 17.29 or 0.28% to close at 6,258.80.

The European Commission President Jose Manuel Barroso will announce a range of heavy fines and sanctions on countries within the European Union that break budget rules in the future at the end of a meeting of finance ministers from the bloc in Brussels.

Reports say any country with debts consistently over 60% of their gross domestic product will invoke automatic fines under the new rules, with the size of the fine varying from country to country.

A senior European Central Bank policymaker Lorenzo Bini Smaghi said that the new Basel III financial reforms will increase the stability of the financial system and outweigh the cost of implementing them in the long run.

The central banker allayed fears that the reforms could cause another credit crunch as banks cut back on lending to beef up their capital reserves.

Spanish unions are holding their first general strike in years amid growing anger over the worsening economic and social situation, while demonstrations are also scheduled across a dozen other countries including Germany, France, Italy and the Republic of Ireland.

Euro area economic confidence strengthened in September to the highest since January 2008. The sentiment indicator increased in September to 103.2 from a revised 102.3 in August, a survey from the European Commission showed today.

The confidence indicator in construction was minus 26 in September from minus 29 in August. Confidence amongst service providers grew to 8 in September as against 7 in August. Retailers'' confidence was minus 1 in September from minus 3 in the previous month.

Consumer price inflation in Germany accelerated slightly in September, according to a preliminary report from the statistics office Destatis.

The report said that annual inflation rose to 1.3% in September from 1% in August. On a monthly basis, prices declined 0.1%. Annual prices growth continued to be influenced by sharp rises for heating oil, motor fuels as well as fruit and vegetables, the statistics office said.

The French consumer sentiment indicator rose to minus 35 in September from minus 37 in August, a monthly survey from the statistics office Insee showed today.

Romania''s central bank retained the key policy rate at 6.25% for a third consecutive rate-setting session. The bank said in a statement that it would ensure an adequate management of liquidity in the banking system.

Greek producer price inflation index rose 4.6% annually in August compared to 6.1% in July, the statistics office said today. Producer price inflation eased for the fourth straight month.

In August, the producer price index for the domestic market grew 4% annually, while for the non-domestic market increased 6.4%.

On a monthly basis, the PPI rose 0.3% in August, compared to a 1.1% fall in July. At the same time, producer prices for the domestic market grew 0.2% and for the non-domestic market increased 0.5%.

Producer prices in Italy grew 3.5% annually in August, following the 3.9% rise in July, according to a report released by the statistics office Istat today.

On a monthly basis, the producer price index gained 0.2% in August, after the 0.1% fall in July.

In another report, Italian business sentiment declined in September after 18 months of improvement. The seasonally adjusted business sentiment index in manufacturing fell to 98.4 in September from 99.3 in August, a survey by research institute ISAE showed today.

Hungary''s annual producer price inflation increased in August, according to a report published by the Central Statistics Office today.

The producer price index rose 9% annually in August, faster than an 8.7% growth in July. Producer prices for manufacturing grew 7.1% annually in August, following a 6.8% rise in July.

On a monthly basis, the PPI decreased 0.2% in August, after rising 0.2% in July. Producer prices for manufacturing industry slipped 0.3% in August.

Sweden''s consumer confidence index rose 3.2 points to a 10-year high in September, the National Institute of Economic Research said today. The corresponding index unexpectedly improved to 28.4 in September from 25.2 in August.

Spanish retail sales slackened in August compared to July as the government’s recent VAT hike continued to impact sales, official data showed today.

Statistics office INE said retail sales fell 1.2% in August compared to a year ago, slower than the 2.2% decrease in July.

Gainers & Losers

Bayer AG, the chemical and pharmaceutical company declined 1.21% to €51.35 after the U.S. Supreme Court said it would consider a case filed by alleged victims of the anti-cholesterol drug Baycol, seeking a class-action suit against a unit of the German pharmaceuticals giant.

Eurazeo SA gained 0.64% to €49.10 after the French investment company completed the sale of its stake in B&B Hotels business to the Carlyle Group for €480 million.

Henkel Ag & Co. KGaA rose 0.37% to €39.60 after the household and consumer goods maker said Bruno Piacenza will succeed Friedrich Stara on its management board as executive vice president of the laundry and home-care division.

H & M Hennes & Mauritz AB plunged 6.7% to SEK 241.70 after the Sweden-based clothing retailer said third quarter profit rose 23% to SEK 4.24 billion or SEK 2.56 per share from SEK 3.46 billion or SEK 2.09 per share last year, reflecting strong sales increase.

Sales, excluding VAT, during the third quarter improved 14% to SEK 26.89 billion from SEK 23.54 billion a year ago.

UBS AG advanced 1.42% to $17.90 after the Swiss banking giant appointed Alex Wilmot-Sitwell, co-head of the company''s investment bank, as co-chairman and co-CEO of the company''s Asia Pacific business.