Dutch Voters Favor Prime Minister, Switzerland Holds Rates

Arthi Gupta
13 Sep, 2012
New York City

Italy sold

[R]2:30 PM Frankfurt – Italy sold €6.5 billion of bonds today and the Swiss National Bank left exchange and interest rate unchanged. Greek jobless rate rose in the second quarter. German growth outlook lowered for this year and next.[/R]

European markets were on the defensive a day after German court ruling that paved the way for the setting up of the bailout. The rescue fund is expected to provide a second line of defense after the European Central Bank announced a plan to buy unlimited amount of the euro zone bonds.

Voters in Dutch election returned Liberal Party with the largest seats in the latest election. The Liberal Party won 41 seats of the 150-seat parliament and the Labor Party won 39 seats.

Dutch Prime Minister Mark Rutte and the leader of the Liberal Party is expected to form a coalition with the Labor Party and continue to follow strict fiscal policy.

The Swiss National Bank left the minimum exchange rate unchanged at Sfr1.20 per euro, as expected. The central bank also retained the target range for the three-month Libor rate unchanged at zero to 0.25%.

Financial markets were also looking ahead at the Federal Reserve announcement that may kick off the third round of stimulus in the U.S.

In Paris trading, the CAC-40 Index declined 19.89 or 0.6% to 3,523.48 and in Frankfurt the DAX Index edged lower 16.17 or 0.2% to 7,327.46.

The yields on Spain’s benchmark 10-year climbed seven basis points to 5.70%. Italian 10-year yields rose four basis points to 5.07%.

Italian Bond Auction

Italy raised €6.5 billion or $8.4 billion from an auction of bonds today.

The Italian government sold €4 billion of 4.5% three-year notes at an average yield of 2.75% compared with an average yield of 4.65% at a similar auction on July 13, the Bank of Italy said. The bid-to-cover ratio declined to 1.49 from 1.73 in July.

The treasury also sold €1.5 billion of bonds due in 2026 at an average yield of 5.32% compared to an average yield of 5.9% at the previous auction in July 2011.

Italy also sold €1 billion of bonds due in 2017 at an average yield of 3.71%.

German Growth Outlook Lowered

Germany''s economy is estimated to grow 0.8% this year from the prior estimate of 0.9% and revised the forecast for next year down to 1.1% compared to 1.7% estimate in June, according to a report released by IfW.

The Kiel-based institute estimated annual average consumer price inflation rate near 2% in both years but the rate is expected to increase to 2.4% during the next year.

Greek Jobless Rate Rises

Greece''s unemployment rate increased to 23.6% in the second quarter from 22.6% in the first quarter, data released by the Hellenic Statistics Authority showed. The jobless rate was 16.3% in the second quarter of 2011.

The number of unemployed persons increased 4.3% to 1.17 million compared with the previous quarter and by 44.2% compared with the second quarter of 2011.

The jobless rate among youth, aged between 15 and 24, surged to 53.9% in the second quarter compared to 43.1% in the first quarter.

Separately, Greece''s import price index increased 3.4% on an annual basis in July, following the 2.4% rise in June. Import prices of intermediate goods rose 0.8% annually, while prices of capital goods declined 0.5% in July.

Import prices in July increased 2.2% compared with the 1.9% decrease in the previous month.

Swiss Producer & Import Price Index Drops

Swiss producer and import price index fell 0.1% annually in August, the Federal Statistics Office said.

The producer and import price index rose 0.4% in August compared with the previous month. This was primarily attributable to higher prices for oil and petroleum products as well as for chemical and pharmaceutical products

Gainers & Losers

Ace Limited rose 0.6% to $75.55 after the Swiss insurer agreed to acquire Fianzas Monterrey in Mexico from New York Life Insurance Company for approximately $285 million in cash.

European Aeronautic Defence and Space Co. plunged 8.1% to €25.73 after the airplanes and military equipment manufacturer confirmed merger talks with BAE Systems plc. EADS shareholders will control 60% and the rest will be controlled by the BAE shareholders.

Investors were lukewarm of the merger prospect and worried that governments of several countries will have to approve the merger.

The combined company would have sales of about $93 billion and employ 220,000 people worldwide compared to Boeing’s sales of $68.7 billion last year.

Home Retail Group plc slumped 4.2% to 95.20 pence after the home and general merchandise retailer reported second quarter total sales at Argos rose 1% to £867 million on comparable sales increased 1.4%.

Total sales at Homebase declined 3.9% to £366 million with comparable sales decline of 3.7% in the quarter.

John Wood Group Plc declined 1.5% to 841 pence after the energy services provider secured a $24 million contract with NRG Energy subsidiary Petra Nova to design and construct a 75 MW gas turbine peaking facility at the W. A. Parish Generating Station.

Next plc plummeted 6.5% to 3,345 pence after the UK clothing retailer reported first-half revenue rose 4.8% to £1,640 million and profit climbed 10.2% to £251 million.