Euro and Markets Trend Lower as Spanish Economy Weakens

Arthi Gupta
29 May, 2012
New York City

The European indexes pared gains after Bank of Spain forecasted weakening economy and retail sales extended slump. Italy sold

[R]1:00 PM Frankfurt – The European indexes pared gains after Bank of Spain forecasted weakening economy and retail sales extended slump. Italy sold €8.5 billion of Treasury bills at higher borrowing costs. The European Financial Stability Facility disbursed €18 billion through bonds to the four largest banks in Greece.[/R]

The European indexes pared after yields on Italian and Spanish bonds rose and Spanish retail sales slumped for the 22nd month in a row and the Bank of Spain estimated economy to weaken in the first half after shrinking by 0.3% in the quarter of the year.

Italy completed the sale of €8.5 billion Treasury bills but at a higher yield and spread of the Spanish bond to German bunds widened to 5.1 percentage points.

The euro edged lower to $1.254 and the British pound gained to $1.568.

The European Financial Stability Facility disbursed €18 billion via bonds to the four largest banks in Greece. National Bank received €6.9 billion, Alpha Bank borrowed €1.9 billion, Eurobank received €4.2 billion and Piraeu Bank accessed €5 billion.

The UK Prime Minister David Cameron held talks yesterday with the Bank of England Governor Mervyn King and Financial Services Authority Chairman Adair Turner to discuss the euro area crisis.

In Paris trading, the CAC-40 Index gained 25.31 or 0.8% to 3,053.40 and in Frankfurt the DAX Index edged higher 36.46 or 0.6% to 6,358.91.

The yield on Spain’s benchmark 10-year bonds traded at 6.41% and on the 10-year Italian bonds was at 5.81%.

Italian Debt Auction

Italy sold €8.5 billion of Treasury bills at higher borrowing costs.

The Italian Treasury sold €8.5 billion of 183-day bills at an average yield of 2.104% compared to 1.772% at the last sale of similar-maturity debt on April 26. The bid-to-cover ratio fell to 1.61 from 1.71 last month.

Spanish Retail Sales Slump

Spain''s retail sales fell 11.3% from a year ago in April after logging a 4% drop in March, the statistics office INE said.

Gainers & Losers

Natuzzi S.p.A. fell 1.3% to $2.69 after the furniture manufacturer reported first quarter net sales fell 8.8% to €110.4 million from €121.0 million in the prior year quarter. Net loss for the quarter widened 180% to €8.4 million or 15 cents per share compared to a net loss of €3 million or 5 cents per share for the year-ago quarter.

Repsol YPF S.A. plunged 5.3% to €13.09 after the integrated oil and gas explorer plans to almost double its net profit in the next five years excluding YPF. The five year strategic plan also includes an investment program of over €19 billion.

Sandvik AB rose 1.6% to S and the specialty steel and tool maker said Emil Nilsson was appointed as its executive vice president and chief financial officer.