European Markets slide, German Economy Shrinks 0.5%

Nigel Thomas
15 Jan, 2013
New York City

European markets traded lower in the region ahead of corporate earnings. Markets accelerated losses on the worries that the U.S. debt negotiations may drag for another two months.

[R]4:30 PM Frankfurt – European markets traded lower in the region ahead of corporate earnings. Markets accelerated losses on the worries that the U.S. debt negotiations may drag for another two months.[/R]

European markets extended losses for the fourth day of decline across the region. Worries of lackluster corporate earnings and weak economic conditions played to the market sentiment.

In London trading, FTSE 100 index closed up 2.8 at 6,111 and in Frankfurt DAX index declined 61.5 or 0.6% to close at 7,668. In Paris the CAC 40 index declined 4.8 or 0.1% to 3,703.

Germany’s gross domestic product declined 0.5% in the fourth quarter from the third quarter according to the latest data released by the Federal Statistics Office in Wiesbaden.

The preliminary survey highlighted the struggling exports and weak domestic demand. For 2012, economic growth declined to 0.7% from 3% in 2011.

Spain’s Treasury office sold €5.75 billion of bills today. Treasury sold 12-month bills at an average yield of 1.472% compared to the 2.556% yield at the auction on December 11 and sold 18-month of debt at average yield of 1.687%, down from the previous auction yield of 2.778%.

Stocks in Review

SAP AG dropped 4.5% and dragged tech stocks after the enterprise software management company failed to beat market expectations. Analysts were hoping that the company will follow the suit after the mail rival Oracle reported better than expected earnings.

H&M gained 3.5% to 228.10 Swedish kronor after the second largest European apparel retailer reported increase in sales for the second month in a row in December that were ahead of expectations.

Burberry Group increased 7% to 1,419 pence after the British luxury bags and apparel maker said third quarter core revenues increased 13% offsetting the weak demand for wholesale revenues. Sales in Asia Pacific region including Hong Kong and China increased 4%, excluding currency swings.

Total sales rose 7% to 613 million pounds or $985 million but wholesale division sales declined 5%. Burberry also added six months revenues in the six months period to March are estimated to decline by a low-to-mid single digit percentage excluding currency swings. The company left its total sales outlook for the full-year unchanged.

Tech stocks were under pressure after Apple Inc declined on the worries that the company may have overestimated demand for its popular phone device. ARM Holdings declined 4.3% on negative opinion from Morgan Stanley.

European automakers were under pressure and Renault SA said it plans cut 17% of its French workforce in the next four years to 2016.

Chief Executive Carlos Ghosn said in an interview in Detroit at the annual industry trade show that the industry sales in Europe are expected to drop another 3% after sales in the region declined to a two-decade low in 2012.

In an interview, the company spokeswoman Sophie Chantegay said that the company plans to eliminate 7,500 positions through 2016.

Other automakers are also looking to cut workforce in the region. Peugeot plan to cut 17% of its workforce or eliminate 11,200 French jobs and Ford is expected to cut 5,700 positions by shuttering three factories and GM is scheduled to close a plant in Germany that may put as many as 3,100 jobs in jeopardy.

Orion Oyj plunged 4.2% to €21 after the broker Jeffries International Ltd said stock was ahead of its valuation after a steep surge of more than 40% in 2012.

Air Liquid declined 1.3% to €91.88 after the Bank of America Merrill Lynch cut its recommendation on the stock on price concerns.

IG Group, the publisher of financial futures of spread betting declined 1.7% to 460 pence after the company said first-half net trading revenues plunged 14% to 169 million pounds and pre-tax profit declined 21% to 81.1 million pounds.