German GDP Growth to Top 3%; Philips Slumps 4.8%

Arthi Gupta
18 Oct, 2010
New York City

The European indexes advanced after Citigroup reported better than expected earnings and Bundesbank forecasted German GDP growth to exceed 3% in 2010. Trichet rejected calls to scrap ECB bond buying. Italy current account deficit rose in August.

[R]4:00 PM Frankfurt – The European indexes advanced after Citigroup reported better than expected earnings and Bundesbank forecasted German GDP growth to exceed 3% in 2010. Trichet rejected calls to scrap ECB bond buying. Italy current account deficit rose in August.[/R]

U.S. stocks traded mixed and Asian markets edged lower.

The IMF Managing Director Strauss-Kahn warned capital flows could lead to financial instability. Moody''s estimated Portugal''s financial strength to weaken further.

Polish wages and salaries growth slowed in September.

In Paris CAC 40 Index increased 2.71 or 0.07% to close at 3,830.08 and in Frankfurt DAX Index edged higher 24.74 or 0.38% to close at 6,517.04.

Germany''s central bank said today that the domestic economic growth should exceed 3% this year compared to the previous year.

In its latest monthly bulletin, Bundesbank shared the view of Economics Minister Rainer Bruederle, who earlier in the day told German ZDF television that German gross domestic product is likely to grow more than 3% this year. The government is due to unveil its new growth forecasts on Thursday. In April, it had predicted 1.4% expansion for 2010.

The Managing Director of the International Monetary Fund Dominique Strauss-Kahn said in Shanghai today that some capital flows can clearly be destabilizing and lead to exchange rate overshooting, credit booms, asset price bubbles, and financial instability.

The European Central Bank President Jean-Claude Trichet rejected calls for the closure of the bank''s controversial program of buying government bonds to support the euro-zone economy.

In an interview with Italy''s La Stampa daily published on Sunday, Trichet said an ""overwhelming majority"" of the bank''s members were in favor of continuing the bond buying program.

Italy and France are looking to curb the impact of proposed reforms to euro-zone budget rules, Britain''s Financial Times newspaper reported on Sunday.

Citing unnamed European diplomats and policymakers, the paper said Italy and France, backed by Belgium, are looking to water down the new ambitious reforms from the European Commission, but that it was unclear to what extent.

The Portuguese government''s financial strength is expected to continue to weaken over the medium term, Moody''s said in a report today.

""Low growth will aggravate the weakness of government revenues unless recent structural reforms bear fruit, limiting the government''s ability to reverse its adverse debt dynamics,"" Moody''s said.

Italy recorded a current account deficit of €5 billion in August 2010, up from the €4.2 billion deficit in the same month in 2009, according to figures released by the Bank of Italy today. The goods account deficit doubled to €2.2 billion in August 2010 from €1 billion in August 2009.

However, the income account deficit shrank to €454 million in August 2010 from €1.4 billion a year ago.

Polish average gross wages and salaries increased at a slower pace in September. The average gross wages and salaries in enterprise sector grew 3.7% annually in September, but slower than a 4.2% growth in August, a report by the Central Statistics Office showed today. The gross wage and salary in enterprise sector amounted to PLN 3403,68.

On a monthly basis, average gross wages and salaries slipped 0.1% in September, compared to a 0.8% fall in August.

BP Plc agreed to sell its upstream businesses and associated interests in Venezuela and Vietnam to TNK-BP, Russia''s third largest oil company for $1.8 billion in cash.

The agreement includes BP''s interests in the Petroperijá, Boquerón and PetroMonagas joint ventures in Venezuela as well as BP''s 35% operating interest in the Lan Tay and Lan Do gas fields and associated pipeline and power generation interests in Vietnam.

Gainers & Losers

ACS Actividades de Construccion y Servicios SA fell 1.02% to €37.51 after the Spanish builder called an extraordinary shareholder meeting for Nov. 19 to approve a capital increase to be used for its bid for Germany''s Hochtief AG.

Air France-KLM SA rose 2.79% to €12.53 after the airlines company was raised to ‘buy’ from ‘hold’ at Citigroup.

JCDecaux SA gained 0.20% to €20.36 after the outdoor advertising firm won a 10-year contract for exclusive advertising rights in all of Saudi Arabia''s 26 airports.

Koninklijke Philips Electronics NV slumped 4.77% to €22.74 after the consumer electronics company reported third quarter sales grew 10% to €6.16 billion from €5.62 billion a year earlier. Net income in the quarter surged to €524 million or 0.55 euro per share from €174 million or 0.19 euro per share in the prior-year quarter.

Metro International S.A. dropped 0.80% to SEK 1.24 after the newspaper publisher stated third quarter net revenue increased 8.2% to €45.94 million from €42.44 million last year. Net profit amounted to €1.00 million compared to a net loss of €8.60 million last year. On a per share basis, the company posted break-even, compared to loss of 0.01 euro cents year ago.