Spain Estimates

Arthi Gupta
06 Jan, 2012
New York City

European indexes climbed the wall of worries after Spain estimated

[R]1:45 PM Frankfurt – European indexes climbed the wall of worries after Spain estimated €50 billion bank reserves for bad property assets. The EFSF sold €3 billion of 3-year bonds yesterday. German industrial orders fell in November. Euro area economic confidence weakened and Swiss consumer prices slid in December.[/R]

The benchmark indexes in Europe traded higher after the successful debt auction from the European rescue fund but bond yields rose for Spain and Italy ahead of debt sale next week.

Market indexes gained in the first week of trading but the euro faced decline of more than 2% against the dollar as banks prepare to raise more capital at a heavily discounted share price and Spain estimated sharply higher bank reserves to account for bad property assets.

The European Financial Stability Facility placed €3 billion of 3-year benchmark bond maturing February 4, 2015 that was met with strong demand with orders of €4.5 billion. The bonds were priced at mid-swap plus 40 basis points, implying a yield of 1.77%.

The proceeds from the sale will be used to fund the rescue measures for Ireland and Portugal, the agency said in a statement. The combined total funding requirements for the two countries total €24 billion for this year.

Spain’s Deputy Prime Minister Soraya Saenz de Santamaria said at a press conference after a cabinet meeting that the government hopes to raise about €8.17 billion in additional revenue this year with the anti-tax fraud initiative.

Separately, Spain’s economy minister was quoted as saying that lenders will have to set aside as much as €50 billion, which amounts to 4% of Spain’s GDP, in extra provisions on bad property assets.

Productivity in the European Union''s private sector economy decreased for the fourth consecutive month in December, data from a survey by Markit Economics showed.

The seasonally adjusted purchasing managers'' index, which measures productivity per worker both in the manufacturing and service sectors, was at 48.7 in December.

In Paris trading, the CAC-40 Index gained 24.89 or 0.8% to 3,169.63 and in Frankfurt the DAX Index edged higher 34.95 or 0.6% to 6.130.75.

For the week, the CAC-40 Index rose 0.4% and the DAX Index soared 4%.

The Italian 10-year bond yield increased 3.8 basis points to 7.2% and the yield on Spain’s 10-year bonds rose 4.1 basis points to 5.72%.

Italian and Spanish government bond yields rose ahead of auctions from both countries slated for next week.

In Madrid, the IBEX 35 Index declined in the early trading but managed to erase 2.6% loss and trade up 0.8% and in Milan MIB Index recovered from the early loss of 3.5% to a gain of 0.8%.

German Orders Fall

German industrial orders dropped 4.8% on a monthly basis in November, reversing the 5% growth in October, data from the Federal Ministry of Economy and Technology showed.

On a yearly basis, factory orders dipped by working-day adjusted 4.3% in November compared to an annual expansion of 5.2% in October.

Euro-zone Sentiment Weakens, Jobless Rate Flat

Euro-zone economic confidence weakened in December, a survey carried out by the European Commission showed today. The corresponding indicator fell to 93.3 in December from 93.8 in November.

In another report, the seasonally adjusted jobless rate in the euro area remained unchanged at 10.3% in November, the same as in October, data released by Eurostat showed.

The number of unemployed increased to 16.4 million in November, up 45,000 from October.

Separately, retail sales in the euro-zone fell 0.8% on a monthly basis in November, following a 0.1% increase in sales in October, data from Eurostat showed.

In EU27, retail sales fell 0.6% on a monthly basis in November and dropped 1.3% from a year earlier.

Danish Jobless Rate Stable, Industrial Confidence Soars

Denmark''s seasonally adjusted unemployment rate remained unchanged at 6.2% in November, data released by Statistics Denmark showed today. The unemployment rate among youth, aged between 16 and 24, dropped to 5.2% in November from 5.3% in October.

Since February 2010, the jobless rate has been hovering between 6% and 6.4%, the agency said.

However, the number of unemployed dropped by 600 from the previous month to 163,000 in November.

Separately, the agency said Denmark''s seasonally adjusted industrial confidence index increased to 6 in December from 1 in November.

Swiss Consumer Prices Drop

Switzerland''s consumer prices declined 0.7% from a year ago in December versus the 0.5% fall recorded in November, data from the Federal Statistics Office showed today.

On a monthly basis, the consumer price index dipped 0.2%.

The average annualized inflation rate for the year 2011 was 0.2%, the statistics office said.

Gainers & Losers

Nestlé SA dipped 0.2% to Sfr54.35 after the food and nutrition company said it continues to expand the market for its breakfast cereals with the opening of a new factory in western Turkey.

Total S.A. rose 1.1% to €40.30 after the oil and gas company inked two exploration licenses with the Mauritanian government that gives it, as operator, a 90% interest in blocks such as Block C 9 in ultra deep offshore and Block Ta 29 onshore in the Taoudeni basin.

Vinci SA climbed 1% to €34.39 after the French construction and concession group agreed to buy Canadian highway construction and road infrastructure group Carmacks.