European Markets Jump 2%, Weak Output in Euro Zone

Jeffrey Gogo
23 Apr, 2013
New York City

Markets in the euro zone surged on the growing speculation that the European Central Bank may be forced to lower benchmark rate. The latest read on manufacturing output showed weakness across the region led by a weakness in Germany.

[R]2:30 PM Frankfurt – Markets in the euro zone surged on the growing speculation that the European Central Bank may be forced to lower benchmark rate. The latest read on manufacturing output showed weakness across the region led by a weakness in Germany.[/R]

European markets advanced on speculation of ECB rate cut and stronger company earnings, however, the euro zone output in April stagnated largely because of weakness in Germany. Bond yields across the currency union declined.

The FTSE 100 in London surged 1.71% or 107.47 to 6,388.09. In Frankfurt, the DAX rose 2.01% to 7,628.59.

The CAC-40 index in Paris surged and led the region with a rise of 2.85% or 104.04 to 3,756.17.

The latest earnings were ahead of market expectations. ARM Holdings Plc and Cie Financiere Richemont SA reported higher than expected earnings.

ARM estimated higher sales and Richemont, the Cartier jewelry retail chain operator reported 30% increase in earnings, beating the estimate of 25% increase.

Weak Reading on Euro Zone Output

Services and manufacturing output index in the euro zone remained flat at 46.5 in April, unchanged from a month earlier, the Markit''s composite purchasing manager survey showed Tuesday. A reading under 50 indicates contracting activities.

Output in Germany declined to 48.8 from 50.6 in March, the first decline in six months..

In France, the composite PMI rose to 44.2 from 41.2 showing slower rate of contraction of the private sector this month, the survey indicated.

The euro fell 0.6% against the dollar today.

Bond Yields Fall

Yield on the German bunds fell four basis points to 1.2%, the lowest in 9 months, after manufacturing output unexpectedly fell.

Italy''s 10-year bonds dropped 8 basis points to 3.98% and Spanish yields on paper of similar maturity fell 19 basis points to 4.3%.

Portuguese debt declined 13 basis points to 5.75% and Irish bonds dropped to 3.48%.

UK Debt Crosses £1 Trillion

The UK lowered its borrowing to £120.6 billion in the year to April compared with £120.9 billion a year ago, the Office for National Statistics said today.

In March, borrowing fell 9.6% to £15.1 billion from £16.7 billion in March.

The public sector net debt reached £1.2 trillion or 75.4% of gross domestic product. The UK targets zero budget deficit by end of 2018.