German Confidence Lifts European Indexes; Portuguese Strike

Arthi Gupta
24 Nov, 2011
New York City

European indexes gained after German business confidence unexpectedly improved in November. Greek opposition leader signed a conditional pledge backing austerity measures. Portuguese workers strike paralyzed nation.

[R]12:30 PM Frankfurt – European indexes gained after German business confidence unexpectedly improved in November. Greek opposition leader signed a conditional pledge backing austerity measures. Portuguese workers strike paralyzed nation.[/R]

European markets edged higher after German business confidence unexpectedly improved in November as world markets traded cautious and the U.S. markets are closed for a holiday.

The European Commission sought more powers to toughen economic governance and fiscal discipline as most members in the euro zone have budget deficits that are at least 50% higher than mandated.

The lax supervision in the last decade has led the euro zone to the brink of collapse and six governments have collapsed in the last six months as interest rates rise and nations struggle to implement austerity measures.

The approvals of the last tranche of the bail out to Greece is still not final as the leading opposition leader refuse to provide written guarantees to implement austerity measures regardless of the outcome of the elections next year.

Greek conservative leader Antonis Samaras has sent a letter to the European Commission saying he supports the terms of Greece''s second bail-out but noted that “certain policies have to be modified,"" reports Kathimerini. EU budget chief Rehn confirmed receipt of the letter, saying it will be discussed with finance ministers.

A general strike staged by Portuguese workers today in protest against the austerity measures brought public life to a standstill. These austerity measures are part of a €78 billion EU-IMF bailout package deal for the debt ridden country.

In Paris trading, the CAC-40 Index gained 34.79 or 1.3% to 2,857.22 and in Frankfurt trading the DAX Index edged higher 64.05 or 1.2% to 5,521.83.

Spanish 10-year bonds yields rose seven basis points to 6.58%, French 10-year yields declined six basis points to 3.63% and Italian yields were static at 6.98%.

Bank of England policymaker David Miles warned that one of the countries in the 17-nation euro area will exit due to the aggravated debt crisis.

""I don''t think any of us can feel confident one way or another about whether all the countries that are currently in the euro zone will still be in it,"" reports quoted Miles as saying in an interview on ITV broadcast on Wednesday.

German GDP, Business Confidence Improve

The German economy grew 0.5% in the third quarter after adjusting for seasonality and calendar, followed a 0.3% increase in the second quarter according to the revised data from the Federal Statistics Office confirmed today. The main positive contributor to the GDP growth was domestic demand, the statistics office said.

Exports rose 2.5% and imports grew 2.6% on a quarterly basis in the second quarter.

Separately, German business confidence unexpectedly improved in November, reports said today. The Ifo business climate index rose to 106.6 in November from 106.4 in October.

EU Seeks Tougher Rules

The European Commission sought more powers to toughen economic governance and fiscal discipline and demanded that all euro area countries send their draft budget plans to the commission by October 15 each year. However, the commission hinted it had the power to request changes and a redraft, if necessary.

""National budgets will be prepared by governments and voted on by national Parliaments,"" European Commission President José Manuel Barroso said on Wednesday.

The EU''s regulatory arm also called for tighter fiscal surveillance of nations like Greece, Portugal, Ireland and also Italy, which has sought aid. Barroso also unveiled plans for euro bonds.

AT&T Estimates $4 Billion Charge in Q4

The U.S. Federal Communications Commission''s Chairman Julius Genachowski opposed the proposed AT&T, Inc’s $39 billion acquisition of T-Mobile USA from Germany''s Deutsche Telekom. However, AT&T Inc. and Deutsche Telekom AG are continuing to pursue antitrust clearance for the transaction either through the litigation pending or alternate means.

AT&T expects to recognize a pretax accounting charge of $4 billion in the fourth quarter, to reflect the potential break up fees due Deutsche Telekom in the event the transaction does not win regulatory approval. The charge will comprise of $3 billion cash and $1 billion book value of spectrum.

Gainers & Losers

Aegon N.V. gained 2.2% to €2.86 after the Dutch insurer completed the sale of UK-based Guardian life and pension business to European private equity group Cinven for £275 million.

EADS NV rose 2.4% to €20.68 after the European aerospace corporation acknowledged that its Airbus division will receive fewer orders in 2012 than this year.

Nestlé SA dipped 0.3% to Sfr50.45 after the processed food maker announced that it has invested £110 million at its Nescafé Dolce Gusto factory in the United Kingdom, creating 300 new jobs and tripling coffee capsule production.

Raiffeisen Bank International AG soared 4.2% to €14.80 after the Austria-based holding company said third quarter consolidated profit declined 58.2% to €130 million versus €311 million last year on the rise in impairment losses provision and the €152 million loss in Hungary.

Volkswagen AG climbed 1.5% to €114.35 after the Japanese car maker Suzuki Motor Corp. commenced arbitration proceedings in London to compel the German automaker to resell it back to the company or the designated third party.