Italian Auction Raises

Arthi Gupta
13 Jul, 2012
New York City

The European indexes gained after China reported GDP that met expectations. Italy sold

[R]1:00 PM Frankfurt – The European indexes gained after China reported GDP that met expectations. Italy sold €5.25 billion of debt today at lower borrowing costs despite a credit rating downgrade. Pernod Ricard agreed to sell certain brands and assets for €103 million.[/R]

European indexes edged higher after China reported better-than-estimated GDP and production data and Italy completed the debt offering as targeted by the treasury.

China''s gross domestic product expanded 7.6% annually in the second quarter, following the 8.1% growth in the first quarter, the National Bureau of Statistics said today.

Separately, the statistics office reported that growth in China''s industrial production eased unexpectedly to 9.5% in June from 9.6% in May.

South Korea''s central bank lowered the growth outlook for the economy. The Bank of Korea said the gross domestic product may rise 3% in 2012, slower than the forecast of 3.5% in April.

Italy completed the debt offering of €5.25 billion from a bond sale today. And, markets largely ignored the latest downgrade of the Italian debt by a ratings agency Moody''s to Baa2 from A3 and maintained negative outlook.

The agency cites that Italy is more likely to experience a sharp increase in its funding costs or the loss of market access due to increasingly fragile market confidence, contagion risk emanating from Greece and Spain and signs of an eroding non-domestic investor base.

In Paris trading, the CAC-40 Index gained 13.44 or 0.4% to 3,148.60 and in Frankfurt the DAX Index edged higher 52.57 or 0.8% to 6,472.20.

For the week, the CAC-40 Index fell 0.6% and the DAX Index surged 5.3%.

The yields on Spain’s benchmark 10-year bonds rose five basis points to 6.68%. Italian 10-year yields surged 10 basis points to 6.01%.

Spain''s banks increased their borrowings from the European Central Bank in June, the Bank of Spain said today. In a sign of lack of investor participation, gross borrowings of banks rose to €365 billion from €324.6 billion in May.

Italian Debt Auction

The Italian Treasury raised €5.25 billion in a bond auction today at lower borrowing costs.

The Treasury raised €3.5 billion from the sale of its July 2015 bond at an average yield of 4.65% from 5.30% in the previous sale of a security with similar maturity on June 14.

The bid-to-cover ratio rose to 1.73 from 1.59 in June.

Italy also sold €1.75 billion of three off-the-run securities due 2019, 2022 and 2023.

French Retail Sales Rebound

French retail sales rebounded in June as sales of food products improved, a survey by Bank of France showed.

Retail activity grew 4.3% on a monthly basis in June on a seasonally and working-day adjusted basis.

Gainers & Losers

BB Biotech AG soared 8.9% to €74.35 after the Switzerland-based investment company pre-announced first half after-tax profit was Sfr354 million.

Pernod Ricard SA climbed 0.3% to €82.78 after the spirits and wines producer sold certain aquavit and bitter brands and assets for €103 million.

Stora Enso OYJ climbed 0.9% to €4.87 after the paper manufacturer stated that it plans to book one-time unusual gain of approximately €45 million on operating profit in its second quarter results.

Volkswagen AG gained 0.2% to €127.95 after the automobile manufacturer reported that its China subsidiary delivered 1.3 million vehicles in the first-half.