Rates in Europe, UK on Hold, Euro Area in Recession

Arthi Gupta
06 Dec, 2012
New York City

Central banks in Europe hold key rates. The euro area economy slipped into recession in the third quarter. German factory orders rebound and UK trade deficit widened in October. Greek jobless rate rose to record levels in September.

[R]2:40 PM Frankfurt – Central banks in Europe hold key rates. The euro area economy slipped into recession in the third quarter. German factory orders rebound and UK trade deficit widened in October. Greek jobless rate rose to record levels in September.[/R]

The European indexes edged higher and the euro area economy slipped into recession in the third quarter. Jobless rates in Greece and France rose and UK deficit widened.

In morning trading, stocks were impacted by the Greek downgrade but recovered by mid-afternoon.

The European Central Bank left its key interest rate unchanged at a record low of 0.75% for the fifth straight month in December. The deposit rate also remained unchanged at zero and the marginal lending facility rate was at 1.5%.

The Bank of England retained the size of quantitative easing at £375 billion and the key interest rate unchanged at 0.50%, as expected.

S&P Lowers Greek Rating

Standard and Poor''s downgraded the credit rating on Greece to ''selective default'' from ''CCC.''

The agency said the decision follows the Greek government''s invitation to private sector bondholders to participate in debt buyback auctions, which under S&P''s criteria amounted to a ''selective default.''

In Paris trading, the CAC-40 Index rose 7.01 or 0.2% to 3,597.51 and in Frankfurt the DAX Index edged higher 70.50 or 1% to 7,525.68.

The yields on Spain’s benchmark rose 10 basis points to 5.53%. Italian 10-year yields climbed 13 basis points to 4.59%.

Euro Area Slips into Recession

The euro area economy slipped into recession in the third quarter, according to a report from Eurostat released today.

The gross domestic product contracted 0.1% in the third quarter from a quarter ago, when it dropped 0.2% matching the preliminary estimate released on November 15.

Annually, GDP fell 0.6% in the third quarter, following a 0.5% drop in the second quarter. The data matched the flash estimate.

German Factory Orders Rebound

Germany''s factory orders grew 3.9% on a monthly basis in October from the 2.4% fall in September, the Federal Ministry of Economics and Technology said today.

Annually, factory orders eased by a calendar-adjusted 2.4% in October compared to the 3.9% fall in September.

Separately, German construction activity contracted for an eighth straight month in November, data from Markit Economics showed.

The seasonally adjusted Construction Purchasing Managers'' Index rose to 48.4 in November from 44.6 in October.

Greek Jobless Rate Rises

Greece’s seasonally adjusted unemployment rate increased to 26% in September from 25.3% in August, revised down from 25.4%, the Hellenic Statistics Authority said. In September 2011, the unemployment rate was 18.9%.

The unemployment rate among youth, aged between 15 and 24, surged to 56.4% in September compared to 47.6% last year.

The number of unemployed increased by 356,495 persons or 38% compared with September 2011 and by 34,670 persons or 2.8% compared with August.

UK Deficit Widens

The UK trade deficit widened to £9.5 billion in October from £8.4 billion in September, the Office for National Statistics said.

The deficit on trade in goods rose to £3.6 billion in October from £2.5 billion in September. The surplus on services remained unchanged at £5.9 billion in October.

Total exports fell 1% £24.4 billion and total imports rose 2.5% to £34 billion.

In another report, UK car registrations increased 11.3% to 149,191 units in November, the Society of Motor Manufacturers and Traders said.

Separately, the UK home prices grew 1% in November from a month ago, a survey by Lloyds Banking Group''s Halifax division showed. There have been five monthly rises and six falls in the first 11 months of 2012

Home prices in November were virtually unchanged compared with November 2011 at an average of £160,879.

French Jobless Rate Climbs

The French jobless rate rose to 9.9% in the third quarter from 9.8% in the second quarter, the statistics office Insee said today. There were 2.8 million unemployed in metropolitan France.