Europe Indexes Fall 1%, German Debt Auction Yields Negative

Arthi Gupta
08 Oct, 2012
New York City

The European indexes edged lower. Germany raised

[R]3:30 PM Frankfurt – The European indexes edged lower. Germany raised €2.42 billion in a debt auction at negative yields. Euro zone finance ministers meet in Luxembourg today with a focus on Spain and Italy.[/R]

European indexes traded lower as Spain and Italy regained the focus and the euro zone finance ministers meet in Luxembourg today to discuss the region’s escalating debt crisis.

In Paris trading, the CAC-40 Index declined 35.90 or 1% to 3,421.26 and in Frankfurt the DAX Index edged lower 94.98 or 1.3% to 7,302.82.

German chancellor Angela Merkel is scheduled to visit Athens on Tuesday and labor unions are planning widespread demonstrations.

Spanish Prime Minister Mariano Rajoy is scheduled to hold talks with French President Francois Hollande in Paris on Wednesday as Spain struggles to convince the euro zone ministers to relax terms of the bailout if the nation is forced to ask.

Economic growth in the East Asia and Pacific region may slow down to 7.2% this year from 8.2% in 2011, the World Bank said in a report released today.

The report notes that tensions in the euro zone have eased following the European Central Bank’s announcement to defend the euro in July and the launch of its bond-buying program that significantly calmed the markets.

However, the report notes that should conditions in Europe deteriorate sharply the economies of the developing regions are likely to be affected.

Last week, the Greek Prime Minister Antonis Samaras said the country is running out of cash and is in urgent need for the next tranche of bailout fund. The Greek premier stated that the country has enough liquidity to sustain only till November.

The Norwegian Finance Ministry said the government plans to lift oil revenue spending to NOK 125.3 billion in 2013.

Investor confidence in the euro zone improved in October and Germany''s industrial production declined a seasonally and calendar adjusted 0.5% from a month ago in August.

The French gross domestic product is expected to decline by 0.1% in the third quarter of 2012, according to the monthly index of business activity.

The yields on Spain’s benchmark 10-year fell four basis points to 5.65% and Italian benchmark bond yield was little changed at 5.05%.

German Bond Auction

Germany raised €2.420 billion from the sale of its 6-month treasury bills against a target of €4 billion, Bundesbank said today.

The average yield on the short-term debt was -0.0218% compared with -0.0147% in the previous sale on September 10. The bid-to-cover ratio rose to 2.3 from 1.5 last month.

OECD Leading Index Declines

The composite leading indicator for the OECD area declined 0.07% from a month ago to 100.1 in August after falling 0.08% each in the previous two months, data released by the Organization for Economic Cooperation and Development showed today.

The relevant sub-index for the euro zone fell 0.1% sequentially to 99.4 in August.