German Confidence Falls, UK Economy Contracts

Arthi Gupta
25 Jul, 2012
New York City

The European indexes traded higher and German business confidence fell more than estimated in July. The UK economy contracted in the second quarter. Cheung Kong led consortium agreed to buy MGN Gas Networks for $1 billion.

[R]1:30 PM Frankfurt – The European indexes traded higher and German business confidence fell more than estimated in July. The UK economy contracted in the second quarter. Cheung Kong led consortium agreed to buy MGN Gas Networks for $1 billion.[/R]

European indexes gained modestly despite the ongoing turmoil in the euro-zone and Spanish and Italian bond yields traded at a new high.

In earnings news, ArcelorMittal second quarter sales fell on lower steel shipment volumes and PSA Peugeot Citroën swung to a first-half loss on lower revenues.

The luxury auto maker Daimler AG reported a decline in second quarter profit and the company blamed weak market conditions in Europe.

Moody''s Investors Service changed the outlook on the provisional Aaa long-term rating of the European Financial Stability Facility to negative from stable.

In Paris trading, the CAC-40 Index edged higher 10.47 or 0.3% to 3,085.85 and in Frankfurt the DAX Index edged higher 13.25 or 0.2% to 6,403.59.

The yields on Spain’s benchmark 10-year bonds rose seven basis points to 7.70% Italian 10-year yields climbed five basis points to 6.55%.

German Confidence Drops

Germany''s business confidence declined in July, according to the latest survey results from Ifo Institute. The Ifo business climate index fell to 103.3 in July from a revised 105.2 in June.

The index measuring assessment of the current business conditions fell to 111.6 in July from 113.9 in June. The expectations index dropped to 95.6 in July from 97.2 in June.

UK GDP Contracts

The UK economy contracted more than expected in the second quarter, the preliminary estimate from the Office for National Statistics showed today.

The gross domestic product fell 0.7% sequentially in the second quarter following a 0.3% fall in the first quarter.

From a year ago, GDP dropped 0.8% in the second quarter.

Italian Sentiment Improves

Italian consumer confidence improved in July, data released by statistics office Istat showed.

The consumer confidence index increased to 86.5 in July from 85.4 in June, revised up from 85.3.

Cheung Kong to Buy MGN Gas Networks

A consortium led by Cheung Kong (Holdings) Ltd. agreed to buy MGN Gas Networks (UK) Ltd., the UK-based gas distribution company for £645 million or $1 billion.

The partners in the consortium are Cheung Kong Infrastructure Holdings Ltd., Power Assets Holdings Ltd. and Li Ka Shing Foundation Ltd.

Gainers & Losers

ArcelorMittal rose 2.4% to €12.02 after the steelmaker reported second quarter sales dropped 10.5% to $22.48 billion from the prior year. Earnings before interest, tax and depreciation declined 28.2% to $2.4 billion from $3.4 billion last year.

Second quarter steel shipments declined 2.5% to 21.7 million tons from the prior quarter.

British American Tobacco plc fell 1.3% to 3,264 pence after the cigarette maker reported first-half revenues rose 0.2% to £7.45 billion from £7.44 billion in the previous year. Pre-tax profit advanced 3.1% to £2.87 billion from £2.79 billion in the prior year.

BT Group plc plunged 4.2% to 208.35 pence after the communications services provider stated first quarter revenue decreased 6% to £4.48 billion from the comparable period in 2011. Pre-tax profit rose 13% to £584 million compared with £517 million last year.

Daimler AG soared 3.2% to €37.30 after the automobile manufacturer reported second quarter revenue climbed 10% to €28.98 billion. Net profit in the quarter fell 10.6% to €1.52 billion from €1.70 billion last year.

In the second quarter, total unit sales increased 8% to 570,300 vehicles.

Peugeot SA slumped 3.9% to $7.55 after the French car maker stated first half group revenues fell 5.1% year-on-year to €29.6 billion. Automotive division revenues declined 10.5%. Net loss was €819 million compared to a profit of €806 million in the first half of 2011.