European Indexes Down; Greece, Ireland, Portugal in Focus

Nigel Thomas
08 Nov, 2010
New York City

European markets closed mixed but traded lower after a strong rally last week. Stocks focused on earnings. Greek index rose after ruling party was ahead in local election in Greece and Prime minister reaffirmed the commitment to fiscal reforms. Ireland was in focus after recent budget cuts.

[R]5:00 PM Frankfurt – European markets closed mixed but traded lower after a strong rally last week. Stocks focused on earnings. Greek index rose after ruling party was ahead in local election in Greece and Prime minister reaffirmed the commitment to fiscal reforms. Ireland was in focus after recent budget cuts.[/R]

European markets fluctuated after a week of solid gains. Major markets in the region closed lower but markets in Greece closed higher after Prime Minister Gorge Papandreou controlled party is ahead in local elections.

German industrial production declined 0.8% in September from August when the index rose 1.5% according to Economy Ministry in Berlin.

The euro in Frankfurt and London trading declined on the worries that Ireland may struggle to bridge its soaring budget deficit. The euro declined 0.7% against the dollar to $1.389 and spread between the yields on the Irish debt and German debt soared to 520 basis points.

Greek bonds rose and the yields on 10-year bonds fell to 11.20%. Nearly 325 seats were contested in local elections and only 60% of eligible voters participated in voting. However, the prospect of win of the ruling party lifted Greek benchmark index.

National Bank of Greece SA increased more than 2.9% to 7.6 euros and Prime Minister Papandreou said on a national television that his government will accelerate reforms and focus on reducing budget deficit. However, 65% of Greek people believe that alternative measures to reduce budget deficits should be pursued and government jobs should not be cut.

Portuguese 10-year bonds declined and the yields spreads to German bonds rose sharply to 440 basis points after Chinese President Hu Jintao left Portugal without any formal announcement to purchase bonds.

Ireland last week announced a plan to raise taxes by as much as 6 billion euros and offered several non-essential costs to be trimmed. European Union Economic and Monetary Affairs Commissioner Olli Rehn is visiting Ireland to review the budget and is due to have a press conference with Finance Minister Brian Lenihan later in the day.

Germany based Commerzbank fell more than 4% after it reported lower than expected third quarter earnings. Third quarter earnings were 113 million euros.

Adidas AG rose more than 2% after it made positive comments on the sales and estimated sales in 2015 to cross Nike sales.

Italcementi SpA declined more than 3.5% to 5 euros after third quarter net declined t63% to 18 million euros and company also cautioned about fourth quarter earnings.

Ratings downgrade lowered E.ON AG and Julius Baer more than 1.3%.

Mediaset SpA declined more than 2.7% on the ongoing worries that the fall of Silvio Berlusconi run government will hurt the media empire controlled by the Prime Minister and may increase competition.

Zodiac Aerospace increased 4% to 51.67 euros after media speculation that Hamilton Sunstrand Corporation may make a bid for the defense contractor. The news was first reported by La Lettre de L’Expansion.