Rates in Europe on Hold; Spain Bond Auction Yields 3.7%

Arthi Gupta
02 Dec, 2010
New York City

The European indexes traded sideways after the European Central Bank retained liquidity measures and held key rate at 1%. Spain successfully raised nearly

[R]4:00 PM Frankfurt – The European indexes traded sideways after the European Central Bank retained liquidity measures and held key rate at 1%. Spain successfully raised nearly €2.5 billion selling 3-year bonds. Euro area third quarter GDP expanded 1.9% and Swiss GDP rose 2.8% from a year ago.[/R]

The European Central Bank President Jean-Claude Trichet announced it will retain exceptional liquidity measures to support commercial banks at least until April of next year.

The longer-term liquidity measures were designed to be scaled back in the first quarter, but the euro zone''s debt crisis has pressured the ECB to backstop the region''s banking system.

Spain raised nearly €2.5 billion selling three-year government bonds in the first bond auction held by the country since Ireland received a €85-billion bailout. However, the yield on the bonds jumped to over 3.7% compared to 2.5% yield at the previous auction.

The auction comes as Prime Minister Jose Luis Rodriguez Zapatero reiterated that Spain will not need external aid, telling CNBC that the Spanish government has had to inject less capital than any other euro-zone nation into its banking system.

Swedish banks are well capitalized compared to international peers and remain resilient to financial shocks, the Swedish central bank said on Thursday. The Riksbank said in its Financial Stability Report that banks should plan to increase capital to face the uncertainty and volatility in the financial markets.

In Paris CAC 40 Index gained 2.06 or 0.06% to close at 3,671.35 and in Frankfurt DAX Index increased 8.62 or 0.13% to close at 6,875.25.

ECB Holds Key Rate

The European Central Bank left its key interest rate unchanged at a record low of 1% for a nineteenth straight month. The central bank also retained its interest rate on the marginal lending facility at 1.75% and that on the deposit facility at 0.25%.

The ECB aims to keep inflation below, but close to 2% over the medium term.

Euro-zone PPI Rises; GDP Expands in Q3

Euro-zone''s producer price inflation rose to 4.4% in October from an upwardly revised 4.3% in September, according to data released by the Eurostat.

On a monthly basis, producer prices rose 0.4% in October, as against the 0.3% rise in September.

In EU27 nations, producer prices grew 4.5% on an annual basis in October and rose 0.5% on a monthly basis.

Euro-zone gross domestic product expanded 0.4% sequentially in the third quarter following a 1% growth in the second quarter, statistics office Eurostat said on Thursday.

On an annual basis, the economy expanded 1.9%, compared to a 2% rise in the second quarter.

French Jobless Rate Flat

The ILO jobless rate in metropolitan France was 9.3% in the third quarter, unchanged from the previous quarter, the statistics office Insee said. The number of unemployed totaled 2.63 million.

Spanish Jobless Claims Rise

The number of people seeking jobless benefits in Spain increased 0.6% or 24,318 in November to 4.1 million, according to official figures released today, the lowest monthly increase in jobless claims since 1998 and follows a 1.7% rise in the previous month.

Services contributed the largest chunk to the latest rise in jobless claims, with unemployment in the sector rising by 15,757. Unemployment also rose in agriculture, while it fell in industry and construction.

Swiss GDP Climbs in Q3, Retail Sales Rise

Switzerland''s gross domestic product rose 0.7% sequentially in the third quarter following a downwardly revised 0.8% growth in the second quarter, the State Secretariat for Economic Affairs SECO said.

On an annual basis, GDP climbed 3% during July to September compared with the revised 2.8% expansion in the second quarter.

Switzerland''s seasonally adjusted retail sales increased 1.4% on a monthly basis in October in real terms, the Federal Statistics Office said. Nominally, retail sales were up 0.7%.

On an annual basis, not seasonally adjusted retail sales were up real 3.5% and grew 1.9% in nominal terms.

Gainers & Losers

Amsterdam Molecular Therapeutics (AMT) Holding N.V. surged 4.10% to €2.03 after the Netherlands-based company engaged in human gene therapy amended and restated its licensing agreement with Amgen for gene therapy applications incorporating the GDNF or glial cell derived neurotrophic factor gene, to which Amgen holds rights. Financial terms were undisclosed.

BMW AG gained 1.82% to €62.01 after the German luxury car maker said its U.S. auto sales rose 27.1% from a year earlier, thanks to strong sales of its all-wheel-drive vehicles.

Daimler AG gained 0.77% to €52.34 after the automaker reported a 10.3% improvement in November U.S. sales of Mercedes-Benz and smart vehicles, compared to the same month last year.

France Telecom SA edged higher 0.06% to €15.78 after the telecommunications giant said it will increase the prices of its French offers by up to €3 a month starting February 2011.

Galapagos NV soared 3.12% to €11.58 after the Belgium-based biotechnology company said it successfully completed the first-in-human trial for GLPG0492, its candidate drug for cachexia and potentially other indications, such as Duchenne muscular dystrophy.

GlaxoSmithKline Plc fell 0.61% to 1,223.50 pence after the UK-based drug maker is nearing a deal to buy China based drug maker Nanjing MeiRui Pharma Co., the Wall Street Journal reported.

Technip S.A. surged 3.59% to €64.13 after the French oilfield services company said it won from Sonatrach, the Algerian national oil company, a contract for the refurbishment and revamping of the Algiers refinery.

This lump sum turnkey contract, worth approximately $908 million, will last 38 months. The contract covers the execution of the complete scope of works, including the design, supply of equipment and bulk material, construction and start-up.

Sutton Harbour Holdings Plc increased 1.25% to 40.50 pence after the property developer and port operator completed the sale of its wholly-owned airline subsidiary, Air South West to Eastern International Airlines.