Bundesbank Lifts Growth Outlook; European Indexes Lower

Arthi Gupta
03 Dec, 2010
New York City

The European indexes pared gains as the euro-zone private sector activity and retail sale improved. The Bundesbank reiterated that German economic recovery is on track. German services PMI rose in November. French service sector growth accelerated in November.

[R]4:00 PM Frankfurt – The European indexes pared gains as the euro-zone private sector activity and retail sale improved. The Bundesbank reiterated that German economic recovery is on track. German services PMI rose in November. French service sector growth accelerated in November.[/R]

European markets slid a day after rebounding after the ECB left key rate on hold and increased the buying of bonds from weaker nations. The indexes were under the pressure after the release of weaker than expected U.S. employment data.

U.S. and European markets declined after downbeat non-farm payrolls data and Asian markets traded mixed.

Spanish industrial production and services activity declined but Swiss inflation remained unchanged in November.

The European Central Bank President Jean-Claude Trichet said today that the euro is “not in crisis and it''s a credible currency.”

""There is no crisis for the euro as a currency,"" Trichet told French radio RTL, adding that there are problems of financial instability due to budget crises in certain European countries.

In Paris CAC 40 Index decreased 13.91 or 0.37% to close at 3,733.13 and in Frankfurt DAX Index edged lower 26.34 or 0.38% to close at 6,931.27. For the week, the CAC 40 Index gained 0.18%.

S&P Warns Greece of Downgrade

Standard & Poor''s warned Greece of a further downgrade as a result of an expected change in a European Union treaty that would bring in a permanent crisis mechanism fund to bailout member states by 2013.

The ratings agency, which already rates Greek debt as ""junk,"" placed the country''s BB+ credit rating on review for a possible downgrade in the next three months.

Euro-zone Private Sector Activity; Retail Sales Improves

Euro-zone private sector activity improved to a three-month high in November, according to data from Markit Economics. The final Markit Eurozone Composite Output Index rose to 55.5 in November from 53.8 in October.

The services Purchasing Managers'' Index climbed to 55.4 in November, versus 53.3 in October.

Euro area retail sales grew 0.5% on a monthly basis in October, after falling by a revised 0.1% in September, the European Union statistics office Eurostat said today.

On a yearly basis, sales rose 1.8% in October, as against the 1.5% increase in September.

In the EU27, retail sales rose 0.4% on a monthly basis and increased 1.8% annually in October.

Bundesbank Lifts Growth Outlook

German services sector activity grew in November, according to survey data from Markit Economics. The seasonally adjusted Services Business Activity Index rose to 59.2 in November from 56 in October, the sharpest rise since August 2007.

The German economic recovery will continue in the next two years following the “impressive catching-up process” in the current year, the Bundesbank said.

The central bank estimated gross domestic product to grow 2% next year and 1.5% in 2012 after an estimated 3.6% growth in the current year. The forecast for 2010 was revised up from 3% growth in August.

The Bundesbank said the unemployment rate could decline to 6.9% in 2012 from the present 7.5% and on average, consumer prices to rise 1.1% this year, 1.7% in 2011 and 1.6% in 2012.

French Service Sector Growth Quickens

French service sector expansion accelerated in November with the seasonally adjusted business activity index rising to 55 from 54.8 in October, the latest report from Markit Economics showed.

Spanish Industrial Production; Services Activity Falls

Spain''s working day adjusted industrial production fell 1.9% annually in October following a revised 1.6% decline in September. All sectors except energy reported decreases in October.

Spanish services activity fell in November, but at a slower pace than in October, according to a survey data released by Markit Economics.

The headline seasonally adjusted business activity index logged 48.3 in November compared with 46.5 in October.

Swiss Inflation Stays Flat

Swiss annual inflation was 0.2% in November, same as in October, the Federal Statistics Office said. On a monthly basis, consumer prices grew 0.2% in November, as against a 0.5% rise in October.

The Swiss economy grew at a slightly slower pace in the third quarter. The gross domestic product rose 0.7% sequentially in the third quarter, following a 0.8% growth in the second quarter.

Gainers & Losers

Accor SA fell 0.35% to €33.18 after the French hotels group said it is selling its assets in Sweden, comprising 18 hotels totaling 1,760 rooms.

Adecco S.A. gained 0.08% to Sfr59.65 after the Switzerland-based human resource services firm said it established a joint venture in Shanghai with FESCO.

Aurubis AG declined 1.83% to €38.88 after the copper producer said that evening production in the flash smelter at the Aurubis plant in Hamburg was disrupted yesterday due to an unknown cause. The smelter was shut down in a controlled manner and is currently cooling down. There are no personal injuries.

AstraZeneca Plc dropped 0.91% to 3,036.00 pence after the drug maker said that an U.S Food and Drug Administration Advisory Committee supported a post approval study for its investigational drug vandetanib.

Bouygues SA rose 0.56% to €32.06 after the builder said its third quarter net profit fell 18% to €391 million from €477 million a year earlier.

Dollar Financial Corp. increased 1.91% to $27.26 after the retail financial services provider announced that its wholly-owned UK subsidiary, Dollar Financial U.K. agreed to acquire Sweden-based Sefina Finance AB for about $73 million.

Rio Tinto Plc dipped 0.68% to 4,385.00 pence after the Anglo-Australian miner said that it signed a deal to establish an exploration joint venture in China with Aluminium Corp. of China or Chinalco.