Euro Area Manufacturing Recession Deepens, UK Inflation Eases

Arthi Gupta
01 Aug, 2012
New York City

European markets overlooked the weakening manufacturing in the euro zone and in Germany and focused on the central bank action as early as this week. Manufacturing recession deepened in the euro area with UK manufacturing at 38-month low in July. BMW quarterly net fell 28%.

[R]3:00 PM Frankfurt – European markets overlooked the weakening manufacturing in the euro zone and in Germany and focused on the central bank action as early as this week. Manufacturing recession deepened in the euro area with UK manufacturing at 38-month low in July. BMW quarterly net fell 28%.[/R]

European stock indexes traded higher in volatile trading ahead of the European Central Bank meeting on a cautious optimism and manufacturing activities declined in the euro zone and in Germany and inflation in the UK eased in July.

In Paris trading, the CAC-40 Index gained 10.65 or 0.3% to 3,302.31 and in Frankfurt the DAX Index edged higher 2.16 or 0.03% to 6,774.93.

The yields on Spain’s benchmark 10-year bonds fell five basis points to 6.73%. Italian 10-year yields declined 12 basis points at 5.96%.

Euro-zone Manufacturing Recession Deepens

Euro-zone manufacturing recession deepened at start of the third quarter, final data from Markit Economics showed today.

The manufacturing Purchasing Managers'' Index for the euro-zone fell to a 37-month low of 44, down from 45.1 in June and below the earlier flash estimate of 44.1.

In another report, the performance of German manufacturing sector took another turn for the worse in July, with output and new orders both declining at the sharpest rates since April 2009, data from a survey by Markit Economics and BME showed.

The seasonally adjusted purchasing managers'' index for the manufacturing sector dropped to 43 in July from 45 in June, its lowest level since June 2009.

Also, the French purchasing managers'' index fell to a 38-month low of 43.4 in July from 45.2 in June, a survey by Markit Economics showed. The flash survey results showed a reading of 43.6.

For the UK, the seasonally adjusted purchasing managers'' index for the manufacturing sector dropped to a 38-month low of 45.4 in July from a revised 48.4 in June.

UK Inflation Eases, Home Prices Fall

Overall shop price inflation in the United Kingdom eased in July to 1% from 1.1% in June, the British Retail Consortium reported.

Food inflation declined in July to a two year low of 3.1% from 3.5% in June.

Separately, UK home prices declined more than expected in July, data from the Nationwide Building Society showed today.

Home prices fell 0.7% on a monthly basis in July, following a 0.6% fall in June.

Average home price was £164,389.

Gainers & Losers

BMW AG plunged 4.7% to €57.89 after the automobile manufacturer reported second quarter revenues rose 7.3% to €19.2 billion from €17.9 billion in the previous year. The number of vehicles sold in the quarter increased 5.4% to 475,011 units.

Net profit in the quarter declined 28.1% to €1.277 billion from €1.775 billion last year.

ENI S.p.A. rose 0.1% to €16.85 after the Italian oil and gas company reported second quarter net sales climbed 24.6% to €30.06 billion from €24.12 billion in 2011. Net profit from continuing operations decreased 87% to €156 million.

Fresenius SE & Co. KGaA dipped 0.6% to €86.25 after the German healthcare provider reported second quarter group sales grew 20% to €4.82 billion from €4 billion in the same quarter last year. Net income surged to €212 million or €1.21 per share from €129 million or 78 cents per share reported last year.

Henkel AG & Co. KGaA climbed 1.4% to €59.29 after the detergent maker reported first half sales climbed 5.6% to €8.214 billion. Net income in the period rose 21.8% to €817 million from €671 million last year.

Schneider Electric S.A. rose 2.6% to €47.23 after the energy management specialist stated first-half sales grew 10% to €11.41 billion from €10.34 billion in the 2011 first half. Net income group share climbed 11% to €890 million from €802 million last year. Earnings per share rose to €1.65 from €1.50 last year.

Societe Generale SA dropped 1.2% to €17.80 after the French lender reported second quarter group net income declined to €433 million from €747 million last year. Net income fell 3.6% to €6.27 billion.

Standard Chartered PLC gained 3.9% to 1,521.50 pence after the lender reported first-half profit increased to $2.856 billion from $2.566 billion. Net interest income climbed to $5.483 billion from $4.941 billion.

Suez Environnement Company SA dropped 1.1% to €8.84 after the water and waste services provider said first-half revenue dropped to €7.32 billion from €7.38 billion in the prior-year period. Net income group share plunged to €40 million from €221 million last year.