Euro Zone Private Activity Drops, UK Mortgage Approvals Rise

Arthi Gupta
23 Aug, 2012
New York City

The European indexes turned lower after a downturn in euro zone economy extended into the seventh month in August. The German economy expanded in the second quarter. The UK mortgage approvals rose more than estimated in July.

[R]1:45 PM Frankfurt – The European indexes turned lower after a downturn in euro zone economy extended into the seventh month in August. The German economy expanded in the second quarter. The UK mortgage approvals rose more than estimated in July.[/R]

European indexes turned down after a contraction in the euro area private sector activity continued in August but optimism ran high that the European Central Bank will follow through with more bond purchase program.

The waiting game in Europe got extended one more time after the leaders held ground at the latest meeting between the euro zone finance chief Jean-Claude Juncker and Greek Prime Minister Antonis Samaras yesterday.

Juncker stated firmly that Greece’s hope of any more time to repay bailout loans hinge on a report from the troika scheduled for release next month.

Markets have largely ignored the possible outcome in the meetings and estimated that at the last minute Germany will blink and offer more time to Greece.

In economic news, the UK mortgage approvals rose more than estimated in July. Euro area private sector activity declined in August.

Corporate earnings were better than estimated.

In Paris trading, the CAC-40 Index fell 29.60 or 0.9% to 3,432.40 and in Frankfurt the DAX Index edged declined 51.9 or 0.7% to 6,966.91.

The yields on Spain’s benchmark 10-year bonds fell 12 basis points to 6.2%. Italian 10-year yields declined 10 basis points to 5.69%.

German Economy Expands

The German gross domestic product rose 0.3% in the second quarter, following the 0.5% growth in the first quarter, data from Destatis showed.

Exports grew 2.5% and imports gained 2.1% from a quarter ago.

French, German, Euro Zone PMI Data

French private sector output fell at a slower pace in August, preliminary data released by Markit Economics and HSBC Bank showed today.

The seasonally adjusted purchasing managers'' index for the manufacturing sector increased to a four-month high of 46.2 in August from 43.4 in July.

The composite output index, which measures performance of both the manufacturing sector and the service sector rose to a six-month high of 48.9 in August from 47.9 in July.

Separately, German private sector output fell at faster rate during August, flash data from Markit Economics showed.

The flash composite output index fell to a 38-monthl low of 47 in August from 47.5 in July.

The manufacturing Purchasing Managers'' Index rose to 45.1 in August from 43 in July. The services activity index dropped to a 37-month low of 48.3 in August from 50.3 in July.

In another report, the downturn in euro zone economy extended into the seventh month, according to a flash estimate from Markit Economics released today.

The Purchasing Managers'' Index for manufacturing rose to 45.3, a four-month high in August, from 44 in July. The services PMI eased to 47.5 in August, from 47.9 in July.

The composite output index rose marginally to 46.6 in August from 46.5 in July.

UK Mortgage Approvals Rise

The UK mortgage approvals rose more than estimated in July, data from British Bankers Association showed today.

The number of mortgages approved for home purchases rose to 28,441 in July from 25,940 in June. The total number of mortgage approvals increased to 55,634 in July from 51,245 in June. The average house purchase approval was at £161,100.

Gross mortgage lending of £7.1 billion in July was below the recent monthly average and reflected continued low levels of activity in the housing market.

Gainers & Losers

Diageo plc rose 0.7% to 1,693 pence after the British alcoholic beverages wholesaler reported full-year net sales grew 8% to £10.76 billion. Profit before tax for the year increased to £3.12 billion from £2.36 billion in the previous year.

Falkland Oil and Gas Limited climbed 0.6% to 88.25 pence after the oil and gas explorer reported first-half pre-tax loss narrowed to $0.2 million compared with a $3.6 million loss last year.

Fielmann AG edged lower 2% to €73.68 after the eye glass frame manufacturer said first-half external sales, including VAT, rose 5.2% to €647.2 million and consolidated sales gained 5.2% to €551.1 million from the prior year. Profit after tax rose to €63.5 million from €62.5 million last year.

Kazakhmys plc declined 0.8% to 699 pence after the copper producer reported first-half revenues declined 17% to $1.52 billion on the combination of lower sales volumes and prices. Profit attributable to equity holders slumped to $121 million from $374 million last year.

Koninklijke Ahold N.V. fell 2.6% to €10.16 after the supermarket operator reported second quarter net sales climbed 12% to €7.692 billion from a year-ago quarter. Net income attributable to shareholders increased 25% to €248 million or 23 cents per diluted share from €199 million or 17 cents per share in the previous year.

Premier Oil PLC dropped 0.6% to 373.80 pence after the UK-based oil explorer reported first-half sales revenues surged to $744.3 million from $342.2 million a year ago. Profit for the period soared to $145.8 million from $88.5 million a year ago.