German Orders Surge; Euro-zone GDP Accelerates

Arthi Gupta
06 Oct, 2010
New York City

The European indexes gained after German factory orders accelerated in August and construction PMI rose in September. Euro-zone GDP growth confirmed at 1% for the second quarter. The IMF estimated euro area growth around 1.7% this year.

[R]6:00 PM Frankfurt – The European indexes gained after German factory orders accelerated in August and construction PMI rose in September. Euro-zone GDP growth confirmed at 1% for the second quarter. The IMF estimated euro area growth around 1.7% this year.[/R]

Asian and European leaders pledged to step up their reforming of the financial system and make it more resilient from future economic shocks. However, no concrete steps were announced.

In a statement issued at the conclusion of the two-day summit in Brussels, the leaders said, ""We encourage the pursuit of credible clearly communicated plans for fiscal consolidation, delivering fiscal sustainability while also protecting economic growth, duly differentiating the speed and timing of consolidation for national circumstances.""

In Paris CAC 40 Index increased 32.98 or 0.88% to close at 3,764.91 and in Frankfurt DAX Index edged higher 54.90 or 0.88% to close at 6,270.73.

The European Central Bank Governing Council members are divided in their views regarding the timing of exiting additional liquidity, according to a report by the Market News International.

The news service reported some members wanted to make substantial new exit moves early in the New Year and measures aimed at limiting the ability of some banks to borrow high volumes from the ECB. But some policy makers that rushing too quickly to withdraw additional liquidity could put unnecessary stress on markets.

The Swiss National Bank Chairman Philipp Hildebrand said today that the Basel III minimum capital and liquidity standards will increase the resilience of the global banking system, but does not address the ""too big to fail"" problem.

He wrote in Wednesday''s edition of the Financial Times that ""The new rules leave authorities with the same terrible choice should a systemically important bank again find itself on the brink of failure: accept financial and economic turmoil, or inject taxpayer money to keep it afloat.""

International rating agency Fitch downgraded Ireland''s long-term foreign and local currency issuer default ratings, or IDRs to A+ from AA-. The outlooks on the long-term IDRs are negative.

In another report, Moody''s Investors Service announced rating actions on several Irish banks and building societies, after placing the government bond ratings on review for possible downgrade earlier this week.

The International Monetary Fund said in its latest edition of the World Economic Outlook that the world economy will grow 4.8% this year led by emerging market and developing countries. The IMF predicts 2.6% growth for the U.S. this year, while euro area is estimated to grow around 1.7%.

The Organization for Economic Cooperation and Development said today that real gross domestic product rose 0.9% sequentially in the second quarter, revised up from the previous estimate of 0.7%. The economy had expanded 0.7% in the first quarter of 2010. Germany, France, Italy, and the UK accelerated on a quarterly basis in the second quarter.

The euro-zone economy recorded its fastest expansion in four years in the second quarter after acceleration in exports and investment.

Euro area gross domestic product grew 1% in the second quarter on a sequential basis, according to second estimates from Eurostat. This follows a 0.3% rise in the first quarter. Annually, economic growth was 1.9% in the second quarter compared to the 0.8% growth recorded in the previous quarter.

German factory orders rose 3.4% on a monthly basis in August, as against a revised 1.6% decline recorded in July, according to data released by the Federal Ministry of Economics and Technology today.

Markit Economics reported Germany''s overall construction activity slightly increased in September. The seasonally adjusted construction purchasing managers'' index rose to 49.9 in September from 48.5 recorded in August.

The Federal Statistics Office said today that Germany''s construction price index for conventionally constructed new residential buildings grew 1.2% in August compared with the prior year. The increase seen in August was the fastest since February 2009.

Industrial production in Spain rebounded 3.2% on an annual basis in August from the 2.3% fall in July, according to a report released by the statistics office INE today. Production of intermediate goods surged 6.5% from a year earlier, while non-durable consumer goods climbed 5.3%. Production in the capital goods sector fell 8.1%.

Johnson & Johnson announced a deal to acquire all outstanding equity of the Netherlands-based biopharmaceutical company Crucell N.V. that it does not already own for €24.75 per share or about €1.75 billion, approximately $2.43 billion in a recommended cash tender offer. The transaction, which is expected to close in the first quarter of 2011, is estimated to have a dilutive impact of about $0.03 to $0.05 on Johnson & Johnson''s 2011 earnings per share.

Former Societe Generale trader Jerome Kerviel has been sentenced to three years in prison and ordered to repay the bank''s €4.9 billion loss. Kerviel’s attorney said he will appeal the verdict.

Pontrilas Group, the partner of 4Energy Invest SA in a co-generation project in the UK decided to withdraw from the project.

Gainers & Losers

Allied Irish Banks, plc declined 2.99% to $1.30 after the commercial bank started the process of selling its 22.4% stake in New York-based regional lender M&T Bank Corp., days after talks ended with Banco Santander SA.

Amsterdam Molecular Therapeutics Holding NV plunged 7.89% to €1.75 after the Netherlands-based company engaged in human gene therapy launched a €15 million equity offering by means of a private placement to certain institutional investors.

Fugro N.V. gained 0.81% to €49.68 after the Dutch oil and geoscience services company purchased the remaining 30% stake it didn''t own in Canada based Jacques GeoSurveys for an undisclosed amount.