Euro Nears 4-Month High on German Ruling Optimism

Arthi Gupta
11 Sep, 2012
New York City

The European indexes declined on euro area woes. German wholesale price index rose in August. The UK home prices declined in August and deficit narrowed in July. Philips plans to slash 2,200 positions and lower costs by as much as

[R]2:30 PM Frankfurt – The European indexes declined on euro area woes. German wholesale price index rose in August. The UK home prices declined in August and deficit narrowed in July. Philips plans to slash 2,200 positions and lower costs by as much as €1 billion.[/R]

European indexes edged lower ahead of the ruling by the highest court in Germany that may delay the setting up of the permanent rescue fund that will provide additional financing to struggling euro zone nations.

Greece is in focus after Prime Minister Antonis Samaras failed to convince coalition members on spending cuts demanded by lenders. The troika has demanded modifications in the austerity measures presented by the Greek government to receive the next tranche of the bailout.

The Greek premier is scheduled to meet ECB President Mario Draghi in Frankfurt later today.

Separately, the Spanish Prime Minister Mariano Rajoy said in an interview to a Spanish television on Monday that the government has not decided if it needs a larger bailout from the euro zone.

Investors focus on the parliamentary elections in The Netherlands tomorrow and a meeting of euro area finance ministers to be held in Cyprus on September 14.

Across the Atlantic, the rate setting committee of Federal Reserve is expected to leave rates unchanged after a two day meeting that ends on September 13 and expectations are high for the next round of monetary stimulus.

In Paris trading, the CAC-40 Index declined 10.67 or 0.3% to 3,496.20 and in Frankfurt the DAX Index edged lower 2.30 or 0.04% to 7.211.35.

The euro reached $1.282 and gained 6% from its two-year low in July.

The yields on Spain’s benchmark 10-year rose five basis points to 5.79%. Italian 10-year yields increased five basis points to 5.23%.

German WPI Climbs

Germany''s wholesale price index increased 3.1% on an annual basis in August compared to the 2% rise in July, data released by the Federal Statistics Office showed today.

Wholesale prices of solid fuels and petroleum products surged 7.2% annually in August, contributing significantly to the overall growth.

From a month ago, wholesale prices climbed 1.1% in August, following the 0.3% increase in July.

French Payroll Employment Drops

The French payroll employment declined 0.1% in the second quarter, following a 0.1% rise in the first quarter, final data from the statistics office Insee showed today.

The number of employed dropped by 22,400 from a quarter ago after increasing 22,800 in the previous quarter.

UK Home Prices Fall, Deficit Narrows

The UK home prices declined at a slower than expected pace in August, a monthly survey from the Royal Institution of Chartered Surveyors'' showed.

The index measuring the average asking price for a home in the UK was at -19 in August, from the revised balance of -23 in July.

Regionally, London was the only part of the country to report a positive reading for prices.

Separately, the UK seasonally adjusted deficit on trade in goods and services was £1.5 billion in July compared with a deficit of £4.3 billion in June, the Office for National Statistics said.

Gainers & Losers

Actelion Ltd. rose 0.3% to Sfr46.86 after the Swiss biopharmaceutical holding company and employees agreed to keep the latest job redundancies to 40.

Ashmore Group PLC fell 0.7% to 337.5 pence after the investment management services provider reported full year total net revenue was at £333.3 million. Profit before tax fell by 1% to £243.2 million from a year ago.

Burberry Group plc plunged 18.7% to 1,119.78 pence after the luxury goods maker said retail sales growth at constant exchange rates was 6% in the 10 weeks to September 8 while comparable store sales were unchanged on a year ago.

Deutsche Bank AG gained 1.7% to €32.28 after the investment bank said it plans to improve cost to income ratio to less than 65% and will take one time charge of €4 billion to achieve savings of €4.5 billion a year by 2015.

HSBC Holdings Plc rose 0.02% to 563.8 pence after the financial services provider’s indirect wholly-owned subsidiary, HSBC Bank Middle East agreed to sell its banking business in Pakistan to JS Bank Limited.

Koninklijke Philips Electronics NV fell 0.3% to €18.97 after the consumer electronics company identified cost saving of €300 million as part of its plan to lower costs between €800 million to €1.1 billion by 2014, and that could lead to elimination of 2,200 jobs around the world.