European Indexes Gain, German Factory Orders Decline

Arthi Gupta
05 Oct, 2012
New York City

The European indexes gained ahead of the non-farm payroll report in the U.S. The French economy is forecasted to grow 0.2% this year and Swiss economic growth outlook was lowered. German factory orders and Spanish output fell in August.

[R]2:30 PM Frankfurt – The European indexes gained ahead of the non-farm payroll report in the U.S. The French economy is forecasted to grow 0.2% this year and Swiss economic growth outlook was lowered. German factory orders and Spanish output fell in August.[/R]

European indexes advanced and gained more after the U.S. jobless rate dropped to the lowest since January 2009 and the ECB President Draghi estimated that the inflation is likely to stay above 2% in 2012.

The Italian, Spanish and French prime ministers are scheduled to meet in Malta today to discuss the regional debt crisis.

Reports suggest that the International Monetary Fund is lowering the global economic growth outlook for 2012 to 3.3% from 3.4%, citing the German business daily Handelsblatt.

The euro area economy is forecast to shrink 0.4% this year and grow 0.2% in 2013.

The European Central Bank President Mario Draghi said on Thursday inflation rates are expected to remain above 2% throughout 2012 owing to high energy prices and increases in indirect taxes in some euro area countries.

Draghi said in his post-meeting press conference held in Ljubljana that economic growth in the euro area is expected to remain weak, with ongoing tensions in some euro area financial markets and high uncertainty still weighing on confidence and sentiment.

The IMF External Relations Department Director Gerry Rice said yesterday that the troika continues to work with the Greek government to find sustainable, feasible measures to bring fiscal policy back on track. However, he reiterated that there was no timeline in terms of report of the mission.

Rice added that Spain has not requested financial support but the IMF is monitoring the banking sector. He also said an IMF mission will visit Madrid October 15 to 26, and provide a report on the status of the banks in the struggling country.

Separately, the Spanish Economy Minister Luis de Guindos reiterated in a speech in London on Thursday that his country does not need a bailout despite speculation to the contrary.

In Paris trading, the CAC-40 Index gained 40.84 or 1.2% to 3,442.04 and in Frankfurt the DAX Index edged higher 78.48 or 1% to 7,380.94.

For the week, the CAC-40 Index soared 2.6% and the DAX Index surged 1.9%.

The yields on Spain’s benchmark 10-year fell nine basis points to 5.81%. Italian 10-year yields declined seven basis points to 5.06%.

German Factory Orders Decline

Germany''s factory orders declined more than estimated in August, the Federal Ministry of Economics and Technology reported today.

Orders dropped 1.3% in August, from a 0.3% rise in July. Domestic orders slipped 3 percent on a monthly basis, while foreign orders remained flat in August.

French Economic Growth Lowered

The French economy is forecasted to grow 0.2% in 2012, below the government''s forecast for a 0.3% expansion, according to the latest forecasts from statistics office Insee.

Spanish Production Falls

Spain''s industrial production fell 3.2% in August, after falling 5.5% in July, the statistics office INE said today.

Production of capital goods slumped 7.6% and that of intermediate goods dropped 4.9% in August.

Swiss Growth Outlook Cut

Switzerland''s growth outlook has been lowered for this year and next, according to a report published by the KOF Economic Institute today.

The economy is forecast to grow 0.9% this year, down from the prior estimate of 1.2%. The projection for 2013 was lowered to 1.3% from an earlier forecast of 1.7%.