Spanish Economy Contracts, Italian Yield Falls Below 6%

Arthi Gupta
30 Jul, 2012
New York City

The European indexes rallied on optimism that the ECB will take steps to resolve the debt crisis. Italy raised

[R]3:30 PM Frankfurt – The European indexes rallied on optimism that the ECB will take steps to resolve the debt crisis. Italy raised €5.5 billion in bond auction at lower yields. The Spanish economy contracted in the second quarter. The euro area economic sentiment fell in July and UK mortgage approvals slid in June.[/R]

European leaders offered more support to the troubled currency union a day after central bank head lifted hopes for a possible action.

The leaders of Germany and Italy voiced strong support for the euro and also said that they are working on a plan to arrest the widening and deepening debt contagion. Separately the latest economic data from Spain confirmed the earlier projection of economic contraction.

Italy''s borrowing costs for 10-year bonds fell below 6% at a debt auction today.

In economic news, German wholesale sales and UK home prices rose in June. The UK mortgage approvals declined more than estimated in June.

In Paris trading, the CAC-40 Index gained 20.84 or 0.7% to 3,301.11 and in Frankfurt the DAX Index edged higher 48.94 or 0.7% to 6,737.71.

The yields on Spain’s benchmark 10-year bonds dropped to 6.5%. Italian 10-year yields were at 5.24%.

Italian Bond Auction

The Italian Treasury sold a total €5.48 billion bonds maturing in 2015, 2017 and 2022 at lower yields.

The country raised €2.5 billion from the sale of its benchmark 10-year bond due September 2022. The average yield dropped to 5.96% from 6.19% in the previous auction on June 28. The bid-to-cover ratio climbed to 1.29 from 1.28.

The nation also sold 5-year debt at an average yield of 5.29% compared to 5.84% in the previous sale on June 28. Demand fell to 1.34 from 1.54 times last month.

Spanish Economy Contracts

The Spanish gross domestic product fell 0.4% in the second quarter following 0.3% contractions in the final quarter of 2011 as well as in the first quarter of 2012, according to the latest data from the statistics office Ine released today.

Annually, the gross domestic product contracted 1% in the second quarter following a 0.4% decline in the first quarter. This also matched the central bank''s forecast.

The decline was mainly led by a fall in domestic demand, the statistics office said.

Separately, Spain’s consumer price inflation increased to 2.2% annually in July from 1.9% in June. The final report is due on August 14.

Euro-zone Sentiment Wanes

The euro-zone economic sentiment index declined to 87.9 in July from 89.9 a month ago, survey data from the European Commission showed.

Industrial confidence was at -15 in July compared to -12.8 in June. Services confidence fell to -8.5 in July from -7.4 in June.

German Wholesale Sales Rise

German wholesale sales increased 4% from a year ago in June following a 2.8% drop in May, the latest data from the Federal Statistics Office showed today.

In the first-half, wholesale trade rose 1% compared to the same period last year.

UK Home Prices Up

The UK home prices rose 0.1% in June from May, data from Land Registry showed.

On a yearly basis, home prices climbed 0.9% in June, taking the average property value in England and Wales to £161,777.

Separately, home prices in the UK declined in July, a survey by Hometrack showed today.

Home prices slipped 0.1% from a month ago in July. London was the only region to report an increase in home prices and the number of new buyers fell 2.4% in the financial center.

UK Mortgage Approvals Drop

The UK mortgage approvals declined more than expected in June, the Bank of England said.

The number of mortgages approved in June fell to 44,192 from 50,544 May. Total lending to individuals rose only £0.3 billion in June.

Gainers & Losers

Accor SA rose 1.8% to €27.06 after the hotel operator announced the sale of two separate entities to A-HTRUST for a total amount of €110 million.

Air France-KLM SA soared 14% to €4.44 after the Franco-Dutch airline reported second quarter revenues grew 4.5% to €6.5 billion. Net loss, group share for the quarter widened significantly to €895 million or €3.02 per share from €197 million or 67 cents per share reported last year.

Air Liquide SA fell 1.3% to €90.51 after French industrial gas maker reported first-half revenue advanced nearly 5.9% to €7.53 billion. Net profit group share climbed 5.3% to €789.7 million from €750.3 million last year.

Aviva Plc climbed 2% to 292.20 pence after the British insurer received unsolicited bids from several financial and private equity groups for its U.S. life division, Aviva USA worth about £1 billion, the Sunday Telegraph reported.

GEA Group AG gained 0.4% to €22.81 after the German management holding company reported second quarter revenues advanced annually to €1.39 billion from €1.35 billion. Net profit in the quarter rose to €72.8 million from €51.6 million reported a year ago.

HSBC Holdings plc increased 1% to 536.60 pence after the financial services provider reported first-half pre-tax profit rose 11% to $12.74 billion from $11.47 billion last year. Net interest income declined 4% to $19.38 billion from $20.24 billion in the comparable period prior year.

Reckitt Benckiser Group PLC fell 0.5% to 3,524 pence after the consumer goods maker said second quarter total net revenue fell 1% to £2.31 billion compared with £2.34 billion in the prior-year quarter.

Ryanair Holdings Plc advanced 0.2% to €3.91 after the low cost airline reported first quarter revenues increased 11% to €1.28 billion as traffic grew 6% and average fares rose 4%. Profit in the quarter fell 29% to €99 million from €139 million last year, driven by significantly higher fuel costs.

TNT Express N.V. edged higher 0.3% to €8.84 after the express delivery company said total revenues rose to €1.83 billion from €1.80 billion in the previous year. Profit attributable to equity holders of the parent for the quarter surged to €40 million from €4 million in the year-ago quarter.