European Markets Turn Volatile on German Economic Outlook

Lucy Stoeva
16 Feb, 2016
New York City

European markets were mixed on Tuesday after volatile banking stocks turned lower and renewed concerns over oil prices. In Germany, economic expectations sank to 1.0 in February from 10.2 in January. Anglo American doubled its net loss in 2015.

[R]4:00 PM Frankfurt, Germany – European markets were mixed on Tuesday after volatile banking stocks turned lower and renewed concerns over oil prices. In Germany, economic expectations sank to 1.0 in February from 10.2 in January. Anglo American doubled its net loss in 2015.[/R]

European markets represented a mixed bag on Tuesday after disappointing German economic data, banking stocks extending losses, and renewed concerns over oil price decline.

Oil occupied the spotlight after a deal between Russia and Saudi Arabia on freezing output levels came under question due to the lack of will of Iran to join the talks and the limitations.

Brent crude oil futures lost 3.5% to $32.22, while West Texas Intermediate crude oil slid 2.17% to $28.80.

In Germany, the closely watched private survey by ZEW of economic expectations indicator tumbled to 1.0 in February from 10.2 in January. The February data represents the lowest reading in more than one year.

The indicator of current conditions was 52.3, compared with 59.7 last month.

On the positive side, European Central Bank President Mario Draghi said on Monday the bank was determined to take action if market turmoil persisted and threatened the economic outlook.

In London, FTSE 100 index gained 20.09, or 0.34% to 5,844.37 and in Frankfurt, the DAX index fell 101.53, or 1.10%, to 9,105.31.

In Paris, the CAC 40 index declined 15.72, or 0.38%, to 4,099.53.

Anglo American Plc inched up 0.7% to 395.65 pence after the miner reported a widening net loss in 2015 due to declining commodity prices.

Pre-tax loss was £3.8 billion for 2015, more than double the loss reported in 2014.

The resource company reported impairments of $5.7 billion of its assets as prices declined.

Anglo American also suspended its dividend to preserve cash.

The mining company plans to sell assets worth $3 billion to $4 billion, including an iron ore mine in Brazil and a stake in an iron ore mine in South Africa.

Forward looking, the company plans to rely mostly on copper, platinum and diamonds.

Electricite de France SA soared 9.2% to €11.26 despite cutting its dividend and reporting a hefty decline in net profit.

The French utility said net profit plunged 68% to €1.16 million in 2015 due to asset impairments.

Non-recurring items amounted to €3.64 billion in 2015, compared to €1.15 billion last year.

The items include impairments on assets in the U.K., Italy, Poland and Belgium, as well as provisions for network renewal and nuclear waste facility.

EDF''s 2015 core earnings rose 1.9% to €17.6 billion from a year ago and sales increased 2.2% to €75.01 billion from 2014.

The utility company slashed dividend to €1.10 euros from €1.25 euros in the previous three years.

The French government controlling 80% stake in EDF, would receive the dividend in shares, helping the company to preserve €1.8 billion in cash.

EDF said its £18 billion investment in the U.K. nuclear power plant project at Hinkley Point is still on track.

The company confirmed its forecast for positive cash flow after dividends by 2018.

HeidelbergCement AG fell 3.1% to €64.20 after the company forecast an increase in global risks in 2016, combined with positive trends in key U.S. and U.K. markets.

Operating earnings jumped 11% to €696 million in the fourth quarter, compared to the same period a year ago, driven by the warm winter in Europe and the weaker euro.

Sales increased 3% to €3.4 billion from the fourth quarter of 2014.

The German cement maker benefited from the lower price of energy, but also saw declining demand in commodity-driven economies.

The company said the €6.7 billion takeover of Italcementi is in progress and raised its synergy target to €400 million a year.

The cement maker’s stock had jumped about 5% on Monday ahead of the earnings announcement.