European Indexes Falter after Spain Downgrade; BMW Net Surges

Arthi Gupta
10 Mar, 2011
New York City

European indexes fell after ratings agency Moody

[R]1:00 PM Frankfurt – European indexes fell after ratings agency Moody’s downgraded Spain’s sovereign debt. French non-farm payroll employment rose in the fourth quarter. German trade surplus declined in January. Spanish retail sales fell in January. BMW annual net surged.[/R]

The worries of sovereign debt default resurfaced a day after Portugal sold its debt at a higher yield and lower bid-to-cover ratio. The latest downgrade of Spanish sovereign debt shifted investors’ focus to the unresolved financial crisis in Europe.

U.S. indexes traded lower after escalating tensions in the Middle East and Brent crude trading above $116 a barrel raised uncertainty about the economic outlook.

Asian markets declined after China recorded a trade deficit of $7.3 in February and Japan increased the GDP shrinkage in the fourth quarter to 1.3% from the previous estimate of 1.1%.

China recorded a trade deficit of $7.3 in February, the government said on Thursday following the $6.45 billion surplus in January.

In Paris CAC 40 Index declined 30.01 or 0.75% to close at 3,963.80 and in Frankfurt DAX Index edged lower 62.24 or 0.87% to close at 7,069.56.

Spain''s Bond Ratings Lowered

Moody''s Investors Service on Thursday downgraded Spain''s ratings by one notch, citing concern over the ability of the government to achieve the budget targets. The government bond rating was slashed to Aa2 from Aa1 with a negative outlook.

The rating agency also noted that the Spain’s government finances are skewed and likely to miss the revenue target. The rating agency’s views, once considered sacrosanct, are not that critical to bond investors.

French Non-farm Payroll Employment, Industrial Production Rise

Payroll employment in France excluding agriculture and some public services rose modestly in the fourth quarter, according to the latest data from the statistics office INSEE on Thursday.

Employment increased 0.2% in the fourth quarter as estimated initially after a 0.1% gain in the third quarter. In the fourth quarter, 37,600 jobs were created, which was an upward revision to the earlier estimate of 35,500. Job creation in the third quarter was revised up to 22,200 from 19,200.

France''s industrial production increased 1% on a monthly basis in January following a 0.2% gain in December as manufacturing rebounded, data from statistics office INSEE showed. Production rose for a third straight month.

Manufacturing improved with 1.8% growth in January, after a 0.2% decrease in December.

Annually, industrial production grew 5.4% in January, after a 7% increase in December. Manufacturing recorded 6.8% growth in January, faster than 6.4% in December.

German Trade Surplus Drops, Insolvencies Down

The German trade surplus declined to €10.1 billion in January, from December''s €12.2 billion surplus, the Federal Statistics Office said.

Exports of goods dropped 1% on a monthly basis in January following a 0.5% rise in December. Annually, exports expanded 24.2%.

Imports advanced 2.3% on a monthly basis in January, reversing a 2.6% drop in December. The annual growth in imports slowed to 24.1% in January from 26.4% in December.

German insolvency courts reported 13,454 insolvencies in December, 1% less than December last year, the Federal Statistics Office said.

The total number of corporate insolvencies fell 1.9% annually to 2,534, while insolvencies of consumers fell 0.8%.

In 2010, altogether 168,458 insolvencies were registered, representing an annual increase of 3.4%.

Spanish Retail Sales Fall

Spanish retail sales declined 4.7% in January from the previous year, following a 4% fall in December, the statistics office INE said on Thursday. Food product sales fell 3.4% annually in January, while non-food sales dipped 5.2%.

Employment in the retail sector declined 0.7% from the previous year, data showed.

Greek Inflation Eases

Inflation in Greece eased to 4.4% in February from 5.2% in January, the Hellenic Statistics Authority said on Thursday.

Prices of food and non-alcoholic beverages grew 2.4% annually in February, while costs of alcoholic beverages and tobacco climbed 19.2%.

On a monthly basis, the consumer price index advanced 1.3% in February.

Gainers & Losers

BMW AG dipped 0.02% to €58.13 after the automobile manufacturer reported fiscal year 2010 revenue climbed 19.3% to €60.477 billion from €50.681 billion in the prior year. Net profit surged to €3.234 billion for fiscal year 2010 from €210 million in the prior year.

The company announced a dividend of 1.30 euros per share of common stock, up from last year''s 0.30 euros per share.

Deutsche Post AG gained 1.28% to €13.10 after the German postal and logistics firm reported fourth quarter revenue increased 12% to €13.87 billion from last year''s €12.39 billion, due to the robust growth produced by the DHL divisions. Net profit in the quarter was €487 million or 0.40 euros per share compared to a loss of €283 million or 0.24 euros per share last year.

The company announced a dividend of 0.65 euros per share, up from the 0.60 euros per share paid last year.

GEA Group Aktiengesellschaft rose 0.49% to €22.59 after the largest system providers for food and energy processes reported full-year 2010 revenue edged higher 0.2% to €4.42 billion from €4.41 billion in the prior year. For the full year, net profit declined 17.3% to €133.7 million or 0.72 euros per share from €161.7 million or 0.87 euros per share last year.

K+S AG declined 0.58% to €54.93 after the German-based agricultural chemical and salt company said fourth quarter Group revenues increased 26.3% to €1.34 billion from €1.06 billion in the prior year, mainly due to volume factors. Net earnings in the quarter surged 690% to €123.2 million from €15.6 million last year.

Linde AG climbed 0.31% to €113.00 after the international industrial gases and engineering company said fiscal year 2010 group sales rose 14.8% to €12.87 billion from €11.21 billion in the comparable period. Full-year net income surged 70% to €1.01 billion or 5.86 euros per share from €591 million or 3.48 euros per share last year.

Munich Re declined 2.41% to €115.55 after the German insurance group maintained its outlook for 2011, stating it expects consolidated result unchanged to €2.4 billion or about $3.32 billion for 2011 despite major claims on natural catastrophes in Australia and New Zealand.

Tognum AG gained 1.51% to €25.27 after the German engine maker reported fourth quarter revenues increased 13.2% to €865.4 million from €764.2 million last year. Net profit in the quarter plunged 76% to €10.9 million from €44.9 million last year.

Volkswagen AG dropped 2.02% to €106.75 after the automobile manufacturer said that, at the level of its operating business, it expects the positive trend seen in the previous fiscal year to continue in 2011.