German Investor Confidence Drops to 21-Month Low

Arthi Gupta
19 Oct, 2010
New York City

The European indexes fell after euro-zone current account deficit widened and construction output fell in August. German economic sentiment slumped in October but exports to exceed

[R]4:00 PM Frankfurt – The European indexes fell after euro-zone current account deficit widened and construction output fell in August. German economic sentiment slumped in October but exports to exceed €1 trillion mark in 2011.[/R]

U.S. stocks edged lower after China raised interest rates and Asian markets traded mixed.

SKF said its third quarter profit nearly tripled from a year ago, helped by growth in volume, price/mix and currency effects.

China''s central bank raised its key interest rates unexpectedly by 25 basis points today in a bid to cool accelerating inflation and overheated economy. The People''s Bank of China hiked the one-year benchmark deposit rate to 2.50% from 2.25% and the one-year lending rate to 5.56% from 5.31%.

In Paris CAC 40 Index decreased 32.37 or 0.84% to close at 3,802.13 and in Frankfurt DAX Index edged lower 29.89 or 0.46% to close at 6,486.74.

Finance ministers from the European Union reached an agreement on quasi-automatic sanctions on member states that break budget and debt rules in the future. The plan, which is yet to be passed in the European Parliament, would impose fines and other sanctions on countries that run up big spending deficits or rack up significant debt. It also includes punishments for countries that foster economic imbalances such as asset bubbles, which could potentially pose a threat to the euro.

The European Central Bank''s executive board member Gertrude Tumpel-Gugerell sought a realistic and ambitious end date to be set for migration to the Single Euro Payments Area, or SEPA.

In a speech delivered last week and published on the ECB''s Web site on Monday, she noted that migration to SEPA instruments - credit transfers and direct debit schemes had been slow due mainly to the prevailing market uncertainty, the difficult economic climate and potential disadvantages for first movers in a network industry.

The euro area current account deficit widened sharply in August to the highest level since September 2009 as surpluses in goods and services decreased, according to data from the European Central Bank released today.

The current account balance was a €7.5 billion deficit in August, which was almost twice as large as the €4.1 billion shortfall in July.

The surpluses in services decreased to €1.5 billion from €2.4 billion and that in goods account fell to €0.9 billion from €2.9 billion in August.

Euro-zone construction output fell for a second successive month in August, although the rate of decline was milder than in July.

Construction output in the 16-nation bloc dropped a seasonally adjusted 0.4% on a monthly basis in August, after a revised 3.2% decline in July. The initial estimate for July was a 3.1% fall.

Euro-zone construction output dropped a working day adjusted 8.5% annually in August, after a revised 6.9% decline in July, according to data from Eurostat released today.

In EU27, construction output fell 1.3% annually, while it rose 2.5% on a monthly basis in August.

German investor confidence slumped more than expected in October, according to research firm ZEW institute. The ZEW indicator of economic sentiment for Germany dropped to -7.2 in October from -4.3 in September. In contrast, the current conditions index surged 12.7 points to 72.6 in October.

German export sector is set to record its fastest growth in a decade this year and may exceed the €1 trillion mark in 2011 for the first time on record, the Federation of German Wholesale, Foreign Trade and Services or BGA said today.

The trade body raised its export growth forecast for this year to 16% from 10%. Exports are expected to total €937 billion this year.

Banco Santander SA, the Spanish bank said on Monday that Qatar Holding will take a 5% stake in its Brazilian unit, Banco Santander Brazil.

Santander will sell $2.72 billion of mandatory convertible bonds to Qatar''s state-owned investment firm, which will be exchangeable for existing or for new shares of the Brazilian unit. The three-year bonds will pay an annual coupon of 6.75% and the exchange price for the bonds will be 23.75 reais, or $14.26, per share.

SKF AB, the ball bearings maker reported a deal to buy U.S.-based lubrication systems company Lincoln Holdings Enterprises, Inc. (Lincoln Industrial) for $1 billion on a cash and debt free basis from privately-owned Harbour Group, to expand sales in North America and Asia.

The company said the proposed acquisition includes all Lincoln, Alemite and Reelcraft entities and brands, and expects the acquisition to highly complementary to its existing lubrication systems business and help to increase its geographical sales coverage in North America and Asia.

Gainers & Losers

Aeroports de Paris SA fell 0.03% to €62.03 after the airport group said that its passenger traffic increased by 5.2% in September from a year earlier.

Bayerische Motoren Werkes AG gained 0.06% to €49.03 after the German automobile, motorcycle and engine manufacturing company signed a pact with carmaker PSA Peugeot Citroen to develop and manufacture hybrid-electric powertrain.

Havas SA dropped 0.05% to €3.69 after the advertising group posted a 5.3% rise in its third quarter revenue.

Iberdrola Renovables SA declined 2.13% to €2.43 after the renewable energy firm said its net profit increased 7.1% in the first nine months of the year.

SKF AB soared 10.30% to SEK 168.20 after the ball bearings maker reported third quarter net sales increased 16% to SEK 15.46 million from SEK 13.32 million last year. Net profit in the quarter surged 196% to SEK 1.42 million from SEK 0.48 million a year ago. Basic earnings per share also rose to SEK 3.05 from SEK 1.01 last year.

Technip SA fell 0.51% to €61.95 after the oilfield services group said it has been awarded a contract by ExxonMobil, on behalf of the Marine Well Containment Co., to design an emergency response system that will be available to contain oil in the event of a potential future underwater well incident in the deep-water Gulf of Mexico.