Ireland Debt Package in Works; European Indexes Gain

Arthi Gupta
17 Nov, 2010
New York City

The European indexes advanced after the European Union confirmed support to Ireland. Euro area construction output fell in September. S&P lowered Cyprus sovereign debt ratings. Spain GDP remained unchanged in the third quarter and Sweden home prices rose in October.

[R]4:00 PM Frankfurt – The European indexes advanced after the European Union confirmed support to Ireland. Euro area construction output fell in September. S&P lowered Cyprus sovereign debt ratings. Spain GDP remained unchanged in the third quarter and Sweden home prices rose in October.[/R]

U.S. markets gained and Asian markets traded lower and European markets rebounded from the sharp losses yesterday.

In Paris CAC 40 Index increased 18.60 or 0.49% to close at 3,781.07 and in Frankfurt DAX Index edged higher 22.61 or 0.34% to close at 6,685.85.

Ireland Debt Package

The European Union on Tuesday confirmed that preparations are underway for a potential emergency loan package for Ireland. But Dublin has not yet asked for help, despite increasing external pressures to seek assistance.

Addressing the monthly meeting of euro-zone finance ministers, EU Economic and Monetary Affairs Commissioner Olli Rehn said intensifying talks on Ireland''s debt crisis will ""strengthen"" plans for a bailout if the country requests.

An IMF spokesperson said, ""At the request of the Irish authorities, an IMF team will participate in a short and focused consultation, together with the European Commission, and the European Central Bank.""

The International Monetary Fund said on Tuesday that Norway''s mainland economy may grow around 2.5% to 3% next year following a revival in household demand. After concluding its annual staff mission, the Fund said the economy may expand 1.75% this year after 1.4% contraction last year.

EU Struggles with Budget

The European Commission President Jose Manuel Barroso on Tuesday lashed at the breakdown in negotiations over the European Union''s 2011 budget, blaming a small number of member states for the deadlock.

Some member states, including the UK had called for a maximum EU budget increase of 2.9% for 2011, lower than the 6% rise approved by the European Parliament and the European Commission.

In another statement, the European Central Bank Executive Board member Jürgen Stark said on Tuesday that phasing out of liquidity support measures will continue after the end of the current quarter.

According to Stark, the exit strategy will be guided by “gradualism and steadiness” and will be “consistent with improvements in financial market conditions and real activity.”

The European Bank for Reconstruction and Development warned governments will be putting long-term growth in emerging Europe at risk if they shy away from implementing crucial reforms just because the recovery is underway in the region.

Euro-zone Construction Drops

Euro-zone construction output dropped a seasonally adjusted 2.1% on a monthly basis in September, following a 0.4% fall in August, according to a report by the Eurostat released on Wednesday. Annually, the construction production decreased 8.1% in September, compared to a 7.3% fall in August, which was revised from 8.5% decline estimated initially.

In EU27, the construction output fell a seasonally adjusted 1.7% on a monthly basis in September, after a flat reading in August, which was revised from the previous estimate of 2.5%. Annually, the construction output dropped 3.6% in September, compared to a 2.4% decline in August.

Cyprus Downgraded

Rating agency Standard and Poor''s downgraded Cyprus'' sovereign credit rating by one notch and set the outlook as ''negative'', citing increasing vulnerabilities in the banking system.

The long-term sovereign credit rating on Cyprus was cut to ''A'' from ''A+'' but the outlook is negative.

Flat Growth in Spain GDP

Spain''s gross domestic product remained flat in the third quarter from the previous quarter, according to a final report from the National Statistics Institute released today. The statistics office confirmed the initial estimate released on November 11.

Annually, the economy expanded 0.2% in the third quarter, following flat growth in the second quarter.

Sweden Home Prices Up

Swedish house prices rose 5% annually in October, as against the 6% increase in September, Statistics Sweden said on Wednesday. The average price for a one or two dwelling building in Sweden was around SEK 2 million during the October quarter.

In yet another report, Swedish industries'' capacity utilization rate rose to 88.6% in the third quarter from 86.9% in the second quarter, the Statistics Sweden said on Wednesday. A year earlier, capacity utilization rate was 79%.

The manufacturing sector''s capacity utilization rate increased to 88.6% in the September quarter from 86.9% in the June quarter, while in the mining sector, it improved to 90.2% from 87.1%.

Hungarian Monetary Update

The Hungarian banking system has seen a decline in their ability to attract capital due to various factors, the country''s central bank said on Wednesday.

In its semi-annual Financial Stability Report, the Magyar Nemzeti Bank blamed the strong Swiss franc, bank levies and the moratorium on foreclosures and evictions for negatively impacting banks'' income-generating capacity.

Members of the Hungarian central bank''s monetary council voted 5-2 to retain its record-low key interest rate, according to minutes of the October 25 policy meeting released today. While central banker Tamas Banfi sought a 25 basis points cut, Peter Bihari favored 25 basis points hike.

Gainers & Losers

AB Volvo rose 0.58% to SEK 96.00 after the Swedish truck maker said truck operations in October amounted to 17,642 vehicles, up 35% compared with the year-earlier period.

BHP Billiton Plc fell 0.65% to 2,303.00 pence after the diversified natural resources company announced approval of $635 million of capital expenditure that would underpin continued growth in Western Australia iron ore mining operation.

EDAP TMS S.A. surged 14.21% to $4.10 after the company that develops and markets the Ablatherm device reported third quarter total revenue increased 4.5% to $7.0 million from $6.7 million last year. Net loss in the quarter narrowed 70% to $2.5 million or 22 cents per diluted share from $8.3 million or 80 cents per share in the prior year.

Nokia Corp. fell 2.23% to $10.08 after the mobile devices maker’s wholly-owned subsidiary, NAVTEQ acquired PixelActive for an undisclosed price.

Roche Holding AG gained 1.12% to Sfr144.10 after the Switzerland-based pharmaceuticals and diagnostics company said it will eliminate 4,800 positions worldwide over the next two years, transfer of some product development activities and sale of certain sites. Further, Roche confirmed its fiscal 2010 outlook.