European Indexes Drop; German PPI Rises, Italy Industrial Orders Fall

Arthi Gupta
19 Nov, 2010
New York City

European indexes declined after China raised the reserve ratio by 50 basis points. Ireland edged closer to accepting bailout package. German PPI rose in October. Greek current account deficit narrowed and Italy industrial orders fell in September.

[R]4:00 PM Frankfurt – European indexes declined after China raised the reserve ratio by 50 basis points. Ireland edged closer to accepting bailout package. German PPI rose in October. Greek current account deficit narrowed and Italy industrial orders fell in September.[/R]

World markets declined after China took yet another step in cooling real estate market. Banks were asked to hold higher reserves and restrict lending for the remainder of the year.

In Paris CAC 40 Index decreased 35.97 or 0.93% to close at 3,832.00 and in Frankfurt DAX Index edged lower 27.12 or 0.40% to close at 6,804.99. For the week, the CAC 40 Index fell 0.06% and the DAX Index decreased 0.47%.

Irish Republic Edges Closer To Bailout

The Republic of Ireland is edging closer to accepting a multi-billion-euro cash injection into its loss making banking sector, after the nation''s finance minister admitted that Dublin will have to accept external aid.

Brian Lenihan told Parliament on Thursday that it would be a ""very desirable outcome"" if a contingency fund is set up by the European Union, the International Monetary Fund and the European Central Bank.

France and Germany are reported to be unhappy with the Republic''s relatively low 12.5% corporation tax rate, which is widely credited with fueling a large inflow of foreign investment into Ireland during the boom years leading up to the crisis. Financial Times quoted one French official as saying the low tax rate was ""almost predatory.""

China Raises Reserve Ratio

The People''s Bank of China stated that it would raise the reserve ratio by 50 basis points, effective November 29, in an effort to manage its surging growth by limiting the flow of cheap cash in its economy.

European Banking Congress

International Monetary Fund Managing Director Dominique Strauss-Khan reportedly said European sovereign debt crisis is not over and he urged more international co-ordination in the wake of fragile global recovery.

Speaking at the European Banking Congress in Frankfurt, Strauss-Khan said co-operation among euro-zone nations is moving slowly.

The European Central Bank President Jean-Claude Trichet on Friday said a strong U.S. dollar is very important. Speaking in a panel discussion with Federal Reserve Chairman Ben Bernanke at an European Banking Congress in Frankfurt, Trichet reportedly said he strongly shared Bernanke''s view that a strong dollar vis-à-vis the other major floating currencies is very important.

Juergen Stark Urges Prohibition of Government Debt Monetization

The ECB Executive Board member Juergen Stark said on Friday it is necessary to prohibit government debt monetization. Speaking at the 6th ECB Central Banking Conference, Stark said some aspects of the monetary framework, such as the independence of the central bank, prohibition of government debt monetization, centrality of price stability and transparent communication will have to survive the financial crisis.

Investor sentiment in central and Eastern Europe region improved ""significantly"" in November along with more optimistic outlook on economic growth, the Centre for European Economic Research or ZEW said in a report on Friday.

The ZEW-Erste Group Bank CEE indicator increased 12.1 points to 31.4 points in November, signaling improved economic expectations on a six month horizon in the region, including Turkey.

German PPI Rises

Germany''s producer price inflation accelerated in October from the previous year, the Federal Statistics Office said on Friday. The producer price index rose 4.3% on an annual basis in October, compared to a 3.9% growth in September. Producer prices increased for the seventh consecutive month.

The latest annual growth was mainly due to rise in prices of energy, the Destatis said. Energy prices increased 0.7% on a monthly basis and grew 7.2% over a year ago.

Greek Current Account Deficit Falls

Greek current account deficit narrowed notably in September due to a fall in trade gap and a rise in surplus on services balance, the central bank said on Friday. The current account deficit dropped 11.4% annually to €1.31 billion.

The surplus of the services balance rose by €108 million, while the income account deficit widened by €88 million, due to higher net interest, dividend and profit payments.

Greece on Thursday announced 2011 budget aimed at reducing its deficit to 7.4% of gross domestic product. The government pledged to cut €5 billion from its deficit next year. That was more than the initially targeted cut of €1.5 billion.

Italy Industrial Orders Decline; Non-EU Trade Deficit

New orders received by Italian industries fell in September, according to latest figures released today. Statistics office Istat said orders fell 1.2% from August, compared to a 6.8% rise in the previous month.

Istat also said industrial turnover fell 0.3% on a monthly basis in September, following a 2.6% rise in August.

Italy''s trade balance with non-EU nations was a deficit of €1 billion in October, reversing €76 million surplus a year ago, figures released by statistics office Istat showed today.

After adjusting for seasonal variations, exports rose 1.6% on a monthly basis and imports climbed 3.2% in October.

Hungary Gross Wages and Salaries Rise

Hungary''s average gross wages and salaries in corporations employing at least 5 persons and in budgetary institutions increased 2.4% in the January to September period compared to the same period of the previous year, the statistics office said on Friday. The average number of employees totaled 2,694,000 persons.

Hungary plans to cut its public debt to around 78% of gross domestic product next year from 79% to 80% this year, the Economy Ministry said on Thursday.

At the same time, the government targets to bring down the public sector deficit to 2.94% of GDP next year along with a 2.8% cash deficit.

Polish Industrial Output Growth Slows; PPI Eases

Polish industrial output grew 8% annually in October, as against an 11.8% growth in September, the Central Statistics Office showed on Friday. On a monthly basis, industrial production dropped 1.6% in October, compared to a 13.1% rise in September.

Polish producer price inflation slowed to 4% in October from 4.3% in September, the Central Statistics Office said on Friday.

On a monthly basis, prices remained unchanged in October compared to 0.1% increase in September. Annually, producer prices in manufacturing industry rose 2.7% and prices in mining and quarrying sector climbed 17.4% in October.

Accenture Acquires CAS Computer

Accenture Plc, the management consultant agreed to acquire CAS Computer Anwendungs-und Systemberatung AG, based in Kaiserslautern, Germany, a provider of customer relationship management and mobility software focused on retail execution and trade promotions for the consumer products industry. Terms of the transaction were not disclosed.

Gainers & Losers

ACE Ltd. rose 2.17% to $60.27 after the provider of insurance and reinsurance products to commercial and individual customers worldwide said its subsidiary, ACE INA Holdings Inc., agreed to sell $700 million of 2.6% senior notes due November 2015. The notes are guaranteed by ACE Limited. The net proceeds from the sale of the senior notes would be used to refinance existing and maturing indebtedness.

Alfa Laval AB gained 0.16% to SEK 123.90 after the Sweden-based provider of specialty products and engineering solutions said it obtained an order worth around SEK 50 million for Alfa Laval Packinox heat exchangers to be used in a refinery in India. The delivery is scheduled for 2011.

Banca Popolare di Milano Scrl fell 2.93% to €2.90 after the Italian bank was downgraded to “sell” from “hold” at UniCredit SpA.

Global Brands S.A. soared 8.33% to 3.25 pence after the company engaged in the sale of Domino’s Pizza products in Switzerland said that it agreed to acquire the entire issued share capital of Pagonia Holding AG for Sfr0.94 million, payable on completion.

Lamprell Plc surged 3.05% to 304.00 pence after the oil and gas rig upgrade and refurbishment services provider said in its interim management statement, it has received a new contract worth $ 210 million from Eurasia Drilling Company.

New World Resources N.V. increased 2.97% to 762.00 pence after the coking and thermal coal producer reported third quarter revenues climbed 40.2% to €408.41 million from €291.28 million last year. Profit for the quarter was €48.51 million, compared to prior year''s loss of €27.61 million, boosted by higher coking coal and coke volume and prices.