Euro Zone Faces Deeper Downturn, Glencore Wins Approval for Xstrata Merger

Nichole Harper
22 Nov, 2012
New York City

European markets jumped and service sector conditions dropped to a 3-year low. Germany and France are struggling with shrinking orders books and the weakening sentiment in the business communities. SABMiller after first-half net income increased 17%.

[R]5:00 PM Frankfurt – European markets jumped and service sector conditions dropped to a 3-year low. Germany and France are struggling with shrinking orders books and the weakening sentiment in the business communities. SABMiller after first-half net income increased 17%.[/R]

European markets closed higher and the latest manufacturing and service sector surveys showed weakening business conditions.

The Markit Purchasing Manager Indexes, private survey, showed service sector declined to 45.7 in November, lowest rating since July 2009. The index has been below 50, which separates the growth and decline, for 10 months in a row.

The coming months are likely to extend the current weakness as expectations in the two largest economies of the euro zone are faltering. Germany and France are struggling with shrinking orders books and the weakening sentiment in the business communities.

The manufacturing PMI index increased to 46.2 in the current month from 45.4 in October.

Market indexes across the region closed higher after the euro gained and Greek bonds advanced for the second week in a row as leaders finalize the details of next tranche of bailout funds.

European Union leaders are set to meet in Brussels today and euro zone finance ministers are scheduled to meet on Monday to finalize details of Greek aid. Leaders of Israel and Hamas agreed to a truce brokered by the U.S. and Egypt after eight days of aerial strikes.

In London trading, FTSE 100 index gained 39 or 0.7% to 5,791, in Frankfurt DAX index advanced 60.03 or 0.8% to 7,245 and in Paris CAC 40 index increased 20.9 or 0.6% to 3,498.

Market indexes opened higher in the region after the latest manufacturing survey in China indicated expansion for the first time after seven quarters of faltering growth.

Stocks in Review

Glencore International Plc added as much as 3% to but closed up 2% or 6.60 pence to 340.70 pence after the European Commission approved its takeover of Xstrata Plc. Xstrata added 2.5%.

Glencore agreed with the European authorities to stop buying zinc from Nyrstar NV to ensure that markets remain competitive and liquid.

SABMiller Plc advanced 6.4% or 168 pence to 2,801 pence after the brewer said earnings in the first half increased 17% after declines in European markets were offset by the gains in Latin America and Africa.

Daily Mail and General Trust Plc jumped 11% to 524 pence after the newspaper publisher said the company will buyback up to 100 million pounds of its shares and added net debt declined to 613 million pounds in the year to September from 719 million pounds.

In the full-year, sales declined 1.3% to 1.96 billion pounds on weak UK advertising revenues and operating profit increased 6.8% to 300 million pounds.

Nokia Oyj gained 1.3% to 2.52 euros after Danske Bank A/S lifted its stock rating and stock price target to 2.90 euros and said that the company is facing improved outlook in 2013.

Alcatel-Lucent soared 16% to 92.50 euro cents on a speculation that the company is close arranging a loan from Goldman Sachs to strengthen its network equipment unit.