European Markets Face Renewed Sovereign Debt Stress

Bikram Pandey
12 Nov, 2010
New York City

European indexes fell as European leaders discuss renewed threat of sovereign bonds stresses in Ireland and Portugal. Resource stocks also fell on the worries that accelerating inflation in China will bring additional tightening in the world

[R]5:00 PM Frankfurt – European indexes fell as the leaders in the region discuss renewed threat of sovereign bonds stresses in Ireland and Portugal. Resource stocks also fell on the worries that accelerating inflation in China will bring additional tightening in the world’s fastest growing economy. Richemont SA jumped 4% after it reported higher net.[/R]

European markets declined and European leaders discussed the sovereign debt as Ireland and Greece take center stage in bond market trading.

The yields of sovereign debts of Ireland, Portugal and Greece declined between 50 and 60 basis points on the hopes that a restructuring plan may be worked out as early as this month. However, investors are increasingly facing a loss in holdings.

Resource stocks declined after inflation in China perked up and the benchmark index in Shanghai plunged more than 5%. The news sent other markets in Asia lower.

CAC 40 index declined 0.9% and DAX 30 index fell 0.2%. Indexes in Ireland, Greece and Portugal closed mixed.

World leaders after a meeting of G20 nations issued a statement that highlighted the division between consuming nations and emerging nations.

The weak statement lacking in details and prepared after much haggling only highlights broader issues related to trade and financial flows and does not identify the root causes of the imbalances and is silent on any corrective actions.

According to preliminary estimate, third quarter gross domestic product in the euro-area and wider zone of 27 nations rose 0.4% compared to previous quarter. Seasonally adjusted GDP rose 1.9% from a year ago quarter in the euro-area and 2.1% in the EU27.

Industrial output in 16-nations euro zone decreased 0.9% and in the wider zone of EU 27 fell 0.5% in September from previous month and rose 5.2% in the euro area and 5.8% in the EU 27 from a year ago.