European Indexes Rebound; Spanish, Italian Yields Above 6%

Arthi Gupta
03 Aug, 2012
New York City

The European indexes edged higher after euro area retail sales increased in June. Spanish and Italian yields rose above 6%. BHP said it will write down $3.3 billion of U.S. shale gas business and Australian nickel operations. RBS quarterly operating profit fell 22%.

[R]2:10 PM Frankfurt – The European indexes edged higher after euro area retail sales increased in June. Spanish and Italian yields rose above 6%. BHP said it will write down $3.3 billion of U.S. shale gas business and Australian nickel operations. RBS quarterly operating profit fell 22%.[/R]

European indexes steadied a day after the European Central Bank said it is prepared to intervene in secondary markets but not without conditions and shifted the onus of first action to politicians.

Impatient markets were quick to drive market indexes from Spain to Germany by more than 2% but markets were steady today. However, investors are jittery on rising Spanish and Italian yields.

In economic news, euro zone retail sales rose unexpectedly in June and the UK recorded the slowest growth in its service sector in 19 months in July.

In earnings news, Allianz second quarter net rose 23% but AXA first-half profit fell 36%.

In Paris trading, the CAC-40 Index gained 87.76 or 2.7% to 3,320.17 and in Frankfurt the DAX Index edged higher 162.47 or 2.5% to 6,768.19.

For the week, the CAC-40 Index gained 1.2% and the DAX Index surged 10.3%.

The yields on Spain’s benchmark 10-year bonds soared 20 basis points to 6.86%%. Italian 10-year yields surged 23 basis points to 6.15%.

Euro Zone Retail Sales Rise

Euro zone retail sales rose 0.1% on a monthly basis in June, following a 0.8% increase in May, Eurostat reported today.

On a yearly basis, retail sales fell 1.2% in June, from the 0.8% drop recorded in May.

In the wider region of EU27, retail sales declined 0.3% on a monthly basis and fell 0.7% from the prior year in June.

Euro Area PMI Data

The euro zone economy remained in a downturn at the start of the third quarter, according to Markit Economics.

The final composite output index rose to 46.5 from 46.4 in June, Markit Economics said. According to flash estimate, the index remained unchanged at 46.4.

The final services business activity index improved to 47.9 in July from 47.1 in June. The flash reading was 47.6.

Separately, Germany''s private sector activity rose unexpectedly in July, data released by Markit Economics showed.

The seasonally adjusted purchasing managers'' index for the service sector increased unexpectedly to 50.3 in July from 49.9 in June.

The composite output index, which measures performance of both the manufacturing sector and the service sector fell to 47.5 in July, from 48.1 in June.

In another report, French service providers reported that business activity was unchanged during July. The seasonally adjusted business activity index climbed to 50 in July, from 47.9 in June, a four-month high.

The composite output index, that measures activity in both manufacturing and services, rose to a four-month high of 47.9 in July compared to 47.3 in June.

UK Service Sector Growth Slows

The UK service sector recorded the slowest growth in nineteen months in July, data from a survey by Markit Economics and the Chartered Institute of Purchasing and Supply (CIPS) showed today.

The seasonally adjusted purchasing managers'' index for the UK service sector dropped to 51 in July from 51.3 in June.

Gainers & Losers

Allianz SE soared 3% to €81.10 after the German insurer reported second quarter total revenue rose 2.5% to €25.2 billion from the prior year. Net income rose 23.4% to €1.234 billion from €1 billion last year.

AXA SA climbed 2.1% to €9.91 after the insurer reported first-half total revenues increased 3% to €48.405 billion. Net income for the period slumped 36% to €2.59 billion from €4.01 billion last year.

BHP Billiton plc fell 1.6% to $57.61 after the diversified natural resources company announced that it would take $3.3 billion write-down on its U.S. shale gas business and Australian nickel operations.

Dexia S.A. plunged 8.7% to €0.21 after the Franco-Belgian lender reported first-half net loss group share narrowed to €1.17 billion or 60 cents per share compared to a loss of €3.96 billion or €2.03 per share last year. The company said prior-year results were restated.

ElringKlinger AG gained 3.4% to €22.66 after the cylinder-head and specialty gaskets manufacturer said second quarter revenues improved 12.4% to €286 million from the same quarter a year earlier. Net income surged 34.6% to €25.3 million from €18.8 million in the prior year.

International Consolidated Airlines Group SA slumped 3.6% to 153.60 pence after the multinational airline holding company reported second quarter total revenue grew 11.5% to €4.61 billion from 4 the prior-year quarter. Pre-tax loss for the quarter was €127 million compared to a pre-tax profit of €86 million last year.

Rentokil Initial plc surged 5.4% to 75.50 pence after the British business services group said second quarter revenue rose 1.1% at actual exchange rates to €632 million from the prior-year quarter. Profit before tax rose 36.6% at current exchange rate to €33.2 million from last year.

Royal Bank of Scotland Group plc soared 4.5% to 213.60 pence after the holding company said second quarter total net interest income declined to £2.97 billion from £3.23 billion in the comparable period in 2011. Operating profit fell 22% to £650 million from £833 million in the year-earlier period.