European Markets Struggle; SAP Rises on Earnings, Peugeot Down 8%

Devan Biswas
27 Jul, 2011
New York City

European markets turned lower after bank lending in the euro-zone rose at a slower pace in June. Swiss leading indicator index declined for the third month in a row and Italian manufacturing index weakened. SAP AG gained after it reported a strong quarter and Peugeot Citroen declined 8%.

[R]3:10 PM Frankfurt – European markets turned lower after bank lending in the euro-zone rose at a slower pace in June. Swiss leading indicator index declined for the third month in a row and Italian manufacturing index weakened. SAP AG gained after it reported a strong quarter and Peugeot Citroen declined on profit warnings.[/R]

The European markets declined for the second day of this week as the U.S. slides near default and may not be able to avert rating downgrade.

Investors also sold bonds of Italy and Spain for the fourth day in a row after cautious comments from the European Union regulator.

The CAC-40 index dropped 0.7% or 27.40 to 3,761 and the DAX 30 index declined 0.4% or 25.90 to 7,324.

The benchmark index in Milan dropped 2.2% to 18,609.30 and in Spain fell 1.5% to 9,690.60

The European Central Bank said that bank lending in the euro-zone rose at a slower pace in June compared to a year ago as banks cut lending in Greece, Portugal and Spain and France.

German finance minister Wolfgang Schaeuble was quoted in the Stern magazine saying that the government is against a “carte blanche” to the rescue fund to buy the bonds of troubled nations.

He also added that Euro-zone integration must progress and the states needing financial assistance must be prepared to give up some of their sovereignty to the European Union.

The latest survey among Italian manufacturers showed confidence declined. The index tracked by the government agency Istat showed that the index fell to 98.5 in July from 100.50 in June.

Switzerland’s KOF leading index indicator declined for the third month in a row in July suggesting slowing economy in the second quarter.

Stock Movers

PSA Peugeot Citroen SA declined 8% to 27.19 euros after the company warned lower profits in its automotive division and rising raw materials cost and the earthquake in Japan.

SAP AG rose 1.9% to 44.31 euros after the company guided revenues and earnings at the high end of the estimate for 2011 and reported strong second quarter earnings.

Merck KGaA dropped 4% to 74.29 euros after the chemical maker reported a loss in the second quarter and lowered its outlook for the year.

Daimler AG decreased 0.7% to 51.43 euros after the automaker offered a cautious global economic outlook.

In the second quarter earnings before interest and taxes soared 23% to 2.58 billion euros and net income surged 30% to 1.7 billion euros on sales increase of 5% to 26.3 billion euros.

For the first half deliveries of Mercedez-Benz brand autos increased 9.7% to 611,000.