BoE Lowers Growth Outlook, German Output Falls

Arthi Gupta
08 Aug, 2012
New York City

The European indexes fell on mixed earnings. The Bank of England cut growth outlook for the UK and French business sentiment dipped in July. DSM agreed to acquire Brazil-based Tortuga for about

[R]2:45 PM Frankfurt – The European indexes fell on mixed earnings. The Bank of England cut growth outlook for the UK and French business sentiment dipped in July. DSM agreed to acquire Brazil-based Tortuga for about €465 million.[/R]

European indexes declined after ratings agency Standard & Poor''s lowered its outlook on Greece''s long-term credit rating to ''negative'' from ''stable.''

The agency forecast the country’s GDP to contract 10% to 11% cumulatively in the two years to 2013 compared to 4% to 5% contraction estimated by troika lenders.

The report predicted the country would require additional financing of up to €7 billion or 3.7% of GDP for 2012 if the economy deteriorates, according to the agency.

The Bank of England lowered its growth outlook for the year and said that output declined in the second quarter to 0.7% and the growth in the third quarter is likely to be weaker than earlier estimate. The central bank also said output is not likely to increase pre-crisis level until 2014.

In economic news, Germany''s industrial production and France’s business sentiment index fell in June.

In earnings news, ING second quarter net fell 22% and Rio Tinto first-half profit declined.

In Paris trading, the CAC-40 Index declined 17.72 or 0.5% to 3,435.56 and in Frankfurt the DAX Index edged lower 30.44 or 0.4% to 6,937.07.

The yields on Spain’s benchmark 10-year bonds rose 5 basis points to 6.95%. Italian 10-year yields climbed three basis points at 5.99%.

German Surplus Rises

German trade surplus unexpectedly increased in June, the latest data from the Federal Statistics Office showed today.

The trade surplus rose to €17.9 billion in June compared to the surplus of €15.6 billion in May and €12.5 billion in June last year.

Exports fell 1.5% on a monthly basis in June following a revised 4.2% gain in May and imports fell 3% from a month ago in June following a revised 6.2% rise in May.

Separately, Germany''s industrial production decreased a calendar and seasonally adjusted 0.9% on a monthly basis in June compared to the revised 1.7% rise in May, data released by the Ministry of Economics and Technology showed.

French Business Sentiment Drops

France’s business sentiment index fell to 90 in July from 91 in June; survey results from the Bank of France showed.

Separately, France''s trade deficit increased to €5.99 billion in June from €5.47 billion in May, data released by the Directorate General of Customs and Excise showed today.

Exports fell to €36.54 billion in June from €37.24 billion in May, data showed.

Imports dropped to €42.53 billion in June from €42.71 billion recorded in May, the agency said.

Spanish Production Eases

Spain''s industrial production eased in June, the statistics office INE said.

Industrial output declined by adjusted 6.3% annually in June compared to the 6.5% fall recorded in May.

Production of consumer goods fell 2.7%, while durable consumer goods output slumped 11.9%.

DSM to Acquire Tortuga

Royal DSM N.V. agreed to acquire Brazil-based Tortuga Companhia Zootécnica Agrária for about €465 million in cash.

Tortuga, a privately held Brazilian company, is a leading company in nutritional supplements with a focus on pasture raised beef and dairy cattle.

Gainers & Losers

Axel Springer AG dropped 2.3% to €36.29 after the German print and digital media firm reported second quarter revenues grew 5.4% to €831.4 million. Net income attributable to shareholders increased to €80.2 million from €79 million in the previous year. On a per share basis, earnings rose to 81 cents from 80 cents a year earlier.

Bayerische Motoren Werke AG dipped 0.3% to €60.35 after the German luxury automaker reported worldwide sales increased 5% to 135,537 vehicles in July.

Brenntag AG decreased 2.5% to €90.19 after the chemical distributor reported second quarter sales increased 14.6% to €2.49 billion from the prior year. Profit attributable to shareholders climbed 23.1% to €81 million from €65.8 million last year.

Corio NV slumped 4.3% to €34.99 after the property investment company reported first-half net result attributable to shareholders plunged to €12.3 million or 13 cents per share compared to €128.8 million or €1.41 per share last year.

Fraport AG fell 2.7% to €45.43 after the airport operator reported first-half revenue increased 2.5% to €1.154 billion. Earnings before interest, taxes, depreciation and amortization rose 2% to €365.7 million.

Heidelberger Druckmaschinen Aktiengesellschaft edged lower 0.8% to €1.04 after the printing machines maker reported first quarter sales fell 4.4% to €520 million. Net loss in the quarter widened to €74 million compared with a loss of €46 million in the previous year.

ING Groep N.V. fell 1.9% to €5.64 after the Dutch financial institution reported second quarter net income dropped 22.3% to €1.171 billion from €1.507 billion in the prior year.

The bank''s core tier-1 ratio strengthened to 11.1% in the quarter.

Old Mutual plc declined 1.1% to 168 pence after the insurer said first-half total revenues rose to £8.44 billion from £6.51 billion last year. Profit for the first half climbed 26% to £931 million or 17.7 pence per share from £738 million or 13.5 pence per share in the same period a year earlier.

Rio Tinto plc rose 0.9% to 3,160 pence after the miner reported first-half consolidated sales revenue fell to $25.34 billion from $29.06 billion in the previous year. Net earnings declined 22% to $5.89 billion from $7.59 billion.

Swisscom AG dropped 1.3% to Sfr389 after the telecommunication services provider said first-half net revenue fell Sfr101 million or 1.8% to Sfr5,621 million and a decline in operating income before depreciation and amortization of Sfr34 million or 1.5% to Sfr2,236 million.