European Markets Jump 1.3%; Spain's Bad Debt at 16-year High

Nigel Thomas
18 Mar, 2011
New York City

Stocks in Europe opened higher after G-7 nations conducted a coordinated action to tame the yen, Libya announced a cease fire and U.N. passed a no-fly zone resolution over Libya. Spain

[R]3:10 PM Frankfurt – Stocks in Europe opened higher after G-7 nations conducted a coordinated action to tame the yen, Libya announced a cease fire and U.N. passed a no-fly zone resolution over Libya. Spain’s bad debt level shot up again to a 16-year high as regional banks suffer more losses.[/R]

European market indexes jumped more than 1.3% after G-7 nations coordinated a move to tame the yen and extended a support for the “round-the-clock” intervention.

The sentiment also improved after Libyan foreign minister announced the cease fire and U.N. passed a resolution to a no-fly zone over Libya. However, no details were provided in the statement.

Crude oil jumped 1% in London trading to $113.10 a barrel.

First estimate of the Euro zone trade deficit in January with rest of the world was €14.8 billion compared to fell of €9.7 billion a year ago month. First estimate for the wider EU27 trade balance in January was €29.8 billion.

Stocks in Germany and France opened higher tracking the gains in Japan and generally market indexes in Europe were ahead on a day when futures of stock options and stock indexes are scheduled to settle.

The DAX 30 index in Frankfurt trading increased 1.3% or 84.37 to 6,741.25, in Paris trading CAC-40 increased 1.6% or 61.59 to 3,847.80 and in Zurich trading Swiss SMI Index added 0.8% or 51.89 to 6,125.31.

The index in Stockholm added 1.5% and in Copenhagen increased 2%. In Southern Europe, the benchmark index in Spain gained 0.7% but in Portugal declined 0.4%.

Spain’s Bad loans Rise

The Bank of Spain on its website that non-performing loan ratio at its banks in January increased to 6.1% from 5.8% in December. The bad loan ratio is the highest since October 1995 and has shot up ten times from the peak of construction cycle in 2007.

The bad loans in January increased to €110.7 billion from €107.2 billion in December.

The bad loan rate is the highest in sixteen years as the nation struggles with the aftermath of fall in homes and commercial properties values.

The central bank has revised the minimum core capital to 8% for listed banks and to 10% for unlisted banks that are known as cajas. This revised capital guidelines will require banks to raise as much as €16 billion in new capital.

Stock Movers

Salzgitter increased 1.1% to €52.59 after metal prices on London Metal Exchange gained.

Brokerage comments also lifted the stocks of Deutsche Wohnen AG by 3.3% to €10.62, Deutsche Boerse AG by 1.7% to €53.61 and BASF by 1.5% to €56.10.

K+S AG increased 1.5% to €50.71 after Commerzbank AG analysts made positive comments on the stock in a research note.

Parmalat SpA increased more than 3% to €2.57 after Groupe Lactalis confirmed its 7.3% holding in the milk and cheese company and also has a contract to buy 4.14% additional stake.

Titan Cement declined 3% to €16.83 after the Greece’s largest cement maker said industry demand in the first two months to February plunged 30% from a year ago.

Banks in Spain declined after the Bank of Spain said that bad loans in January soared to their highest level in 16 years. BBVA declined 1.5% before recovering to a loss of 0.4% to €8.63.

PubliGroupe SA soared more than 6% to Sfr114.91 after the company said its annual income in 2010 increased 42.6% to Sfr42.60 million.