Greece and Spain Weigh on European Market Sentiment

Arthi Gupta
06 Nov, 2012
New York City

The European indexes advanced and Greece and Spain weighed on the market sentiment. The IMF warned that the growth outlook for France remains fragile. The Spanish economy is forecasted to contract 1.6% this year. Greek strike paralyzes nation.

[R]4:10 PM Frankfurt – The European indexes advanced and Greece and Spain weighed on the market sentiment. The IMF warned that the growth outlook for France remains fragile. The Spanish economy is forecasted to contract 1.6% this year. Greek strike paralyzes nation.[/R]

European markets traded higher in a cautious trading and insurance stocks led the gainers after Hannover Re reported better than expected earnings. Greece and Spain weighed on the market sentiment.

Spain’s Prime Minister Mariano Rajoy said that he is not ready to accept the wider bailout until he has a clear sense of where sovereign bond yields will trade after the bailout.

Greece came to a standstill after labor unions called for a two-day strike to protest against the austerity measures initiated by the government to receive the next tranche of the bailout package from the troika.

The Greek parliament is scheduled to vote on the bailout package tomorrow after a debate.

In Paris trading, the CAC-40 Index gained 14.23 or 0.4% to 3,462.73 and in Frankfurt the DAX Index edged higher 43.52 or 0.6% to 7,369.96.

The yields on Spain’s benchmark 10-year fell five basis points to 5.71%. Italian 10-year yield dropped five basis points to 4.95%.

French Economic Outlook Fragile

The growth outlook for France remains fragile reflecting weak conditions in Europe generally, the International Monetary Fund said in a report on Monday.

However, the agency estimated that France’s competitiveness gap emerges as the main challenge for macroeconomic stability, growth, and job creation and projected that real GDP growth in France will accelerate only marginally in 2013, to 0.4% from 0.1% in 2012.

Separately, Spain''s economy is forecasted to contract 1.6% this year, according to a draft of the autumn forecast to be published on Wednesday by the European Commission, the newspaper El Pais reported today.