European Indexes Slump; Euro-zone Inflation Accelerates

Arthi Gupta
16 Nov, 2010
New York City

The European indexes declined on concerns of possible policy tightening measures from China. Euro-zone inflation accelerated in October. German economic sentiment rebounded in November. French non-farm payrolls rose in the third quarter. Vivendi net plunged 38%.

[R]4:30 PM Frankfurt – The European indexes declined on concerns of possible policy tightening measures from China. Euro-zone inflation accelerated in October. German economic sentiment rebounded in November. French non-farm payrolls rose in the third quarter. Vivendi net plunged 38%.[/R]

U.S. and Asian markets declined on indications that China is contemplating an interest rate hike to curb inflationary pressures and debt worries concerning Ireland.

In Paris CAC 40 Index slumped 69.10 or 1.79% to close at 3,795.14 and in Frankfurt DAX Index edged lower 72.27 or 1.06% to close at 6,717.90.

Irish Prime Minister Brian Cowen insisted that his government has no intentions of asking for external aid from the European Union amid speculation that the Republic could be forced to accept a bailout to prevent uncertainty from spreading to other euro-zone countries.

The European Union finance ministers are meeting in Brussels to discuss Ireland''s debt problems. Ireland insists the problem is related to liquidity for its banks rather than sovereign debt.

The European Central Bank Vice President Vitor Constancio called on the financial sector to be more closely involved with the soon to be established European Systemic Risk Board.

""The industry needs to be closely involved in risk detection and overall surveillance work, as information and insights from market participants will be essential inputs,"" he said at the Euro Finance Week in Frankfurt.

Inflation in the euro area accelerated to the highest level in nearly two years in October, driven by a sharp increase in energy prices.

Euro-zone annual inflation rose to 1.9% in October from 1.8% in September, according to a final report published by the Eurostat today. The statistics office confirmed the initial estimate released on October 29. Core annual inflation rose to 1.1% in October from 1% in September.

In the EU16, transport charges rose 4.3% annually in October and alcohol and tobacco prices advanced 3.4%. Clothing and housing prices increased 0.4% and 3.2%, respectively in October.

The European Automobile Manufacturers'' Association said on Tuesday that new car registrations in the European Union fell 16.6% on an annual basis to 1,027,036 units in October. A year ago, registrations were up 1.7%. Car sales fell 20% in Germany, 18.5% in France, 22.2% in the UK and 28.8% in Italy.

In the first ten months of the year, new car registrations in EU dropped 5.5% to 11,279,542.

German economic sentiment index climbed to 1.8 in November from minus 7.2 recorded in October, the Mannheim-based Centre for European Economic Research, or ZEW, said on Tuesday.

French non-farm payrolls rose 0.3% between July and September compared to the previous months, according to the preliminary figures released by the statistics office INSEE today.

A total of 44,600 jobs were estimated to have been added during the last quarter, nearly twice as much as 24,000 jobs created during the preceding quarter. This represents a 0.6% increase from the same period a year ago.

Sweden''s central government budget balance is forecast to show surplus in 2011, the Debt Office said in a report on Tuesday. As a result, borrowing will be reduced in the coming years. A stronger economy and increased tax income will lead to the central government budget being close to balance in 2010, the report said.

The budget deficit is estimated to fall to SEK 5 billion in 2010. Further, a surplus of SEK 18 billion is expected in 2011 and SEK 78 billion in 2012. The forecast for 2012 includes assumed income from sale of state-owned assets amounting to SEK 35 billion.

The Conference Board leading economic index for Spain dropped 0.1%, after rising 0.5% in August. Negative contributions to the indicator were from industrial production excluding construction, retail sales survey and employment.

Gainers & Losers

AstraZeneca Plc fell 1.20% to $48.45 after the UK-based drug maker is seeking to sell its Astra Tech business, a unit that makes dental implants and medical devices for $2 billion, according to media reports.

Iliad S.A. gained 0.55% to €78.65 after the telecoms group said its third quarter revenue rose 5% to €511.1 million from €486.7million in the same period last year.

Rolls-Royce Group PLC fell 1.51% to 588.00 pence after the power systems and services company asked Airbus maker European Aeronautic Defence and Space Co. to return some Airbus A380 engines from production lines, according to reports released on Tuesday.

Sonova Holding AG rose 2.63% to Sfr125.00 after the Switzerland-based company operating in the healthcare sector said first-half sales of Sfr831.5 million and income after taxes increased 4% to Sfr170.5 million from Sfr164.2 million in the previous year. Basic earnings per share amounted to Sfr2.583 compared to Sfr2.520 last year.

Technip S.A. dropped 2.97% to €61.43 after the French oilfield services company said it has been awarded an engineering, procurement and construction support lump sum contract by Valero Refining Company for two flare gas recovery units at its Port Arthur, Texas refinery.

Vivendi SA declined 2.68% to €19.94 after the French media and entertainment giant said third quarter revenue rose 8.5% to €6.89 billion from €6.35 billion a year earlier. Net income in the quarter dropped 38% to €372 million from €600 million a year earlier, hurt by steep increases in financial charges and amortization costs. On a per share basis, earnings were lower at €0.30 euros compared with €0.49 euros last year.