German Confidence Dips to 26-year Low

123jump.com Staff
24 Feb, 2009
New York City

European exporters and banking stocks led the decline in the regional trading. Akzo Noble reported its first loss in eight years and navigation device maker Tom Tom reported a loss. German confidence dipped to 26-year low. More people withdraw cash from Swiss banks accroding to the central bank.

[R]1:00PM New York, 6:00 Frankfurt – European companies profit outlook appear weak as exports face slowing sales and stronger currency. German business confidence index falls to 26-year low.[/R]

European stocks retreated further as weak earnings, falling confidence in Germay and widening recession. Federal Reserve Chairman Ben Bernanke warned that the recession may persist until 2010 and urged policy action to stabilize credit markets.

Business confidence in Germany slumped to a 26-year low with export performance, particularly for the automotive industry, likely to dip through the second quarter. BMW AG, Volkswagen and Daimler declined on the worries that exports to the U.S. and other markets will decline.

BMW AG fell 5.1% after Morgan Stanley downgraded the largest automaker in Europe on a negative sales forecast. However, consumer spending in France recovered in January as retailers introduced discounts to induce sales. Banks rose.

Akzo Nobel NV, the world’s biggest manufacturer of paints, reported its first loss in eight years and indicated it may write down 1.2 billion euros in bad debts. TomTom NV, the world’s largest producer of car navigation systems, also reported a fourth-quarter loss.

Market Sentiment

In Frankfurt trading the DAX 30 Index declined 1% or 40.7 to 3,895.75.

Of the DAX index shares, 16 gained and only 14 lost.

Deutsche Bank led advancers with a gain of 5.6%, followed by gains in Deutsche Boerse of 2.9%, in Man AG of 2.8%, RWE AG 2.6% and Commerzbank of 2.5%.

BMW led decliners with a loss of 5.8% after a downgrade by Morgan Stanley, followed by losses in Muenchener Rue-R of 3.9%, in Infineon Tech of 3.5%, in Volkswagen AG of 3.4% and Allianz SE-REG of 2.4%.

In Paris trading the CAC 40 retreated further by 0.7% to 2,708.05.

Credit Agricole led advancers and added 4.2%, followed by gains in Societe Generale of 3.4%, in Vivendi of 2.9%, in Accor of 1.7% and LVMH of 1.5%.

Saint Gobain led decliners with a loss of 9.7%, followed by losses in Axa of 5.6%, in Alcatel Lucent of 5%, in Vallourec 4.9% and Eads of 4%.

German Business Confidence Drops to 26-year Low

Ifo Institute reported that business climate for industry and trade in Germany slumped in February, with the outlook also showing strong recession-related stress.

The institute’s business climate index for the manufacturing sector dropped from 83 in January to 82.6 in February, the lowest level in 18 years.

The 7,000 executives sampled and surveyed by Ifo estimated that export business will continue to contract on the pessimism that not enough was being done to curb the growing crisis.

In contrast, the six-month outlook for retail business was less pessimistic as the business situation improved slightly buoyed by car retail business. Car sales rose after the government introduced a grant for scrapping old cars.

The business climate in the construction industry also improved.

French Consumer Spending Rebounds

UniCredit Global Research in a statement said consumer spending in France made a surprise recovery in January and increased 1.8% from December as retailers introduced “aggressive discounts” for the New Year. Compared to the same period in 2007, January sales also rose by the same proportion.

BMW downgraded as sales continue the free-fall]

Morgan Stanley predicted that sales at Bayerische Motoren Werke AG, may fall by a third by 2010 and downgraded the automaker from “overweight” to “underweight.”

Earnings Review

Basilea Pharmaceutica AG, a Switzerland-based research and development biopharmaceutical company said full-year revenues rose 46.3% to Sfr 12.0 million from Sfr 8.2 million, a year earlier. Net loss in the full-year was Sfr 143.5 million or Sfr 15.02 per diluted share compared to net loss of Sfr 126.8 million or Sfr 13.97 per share, a year earlier.

Georg Fischer AG, a supplier of iron casting and automotive systems for industrial applications said full-year sales fell 0.66% to Sfr 4.46 billion from Sfr 4.49 billion, a year earlier. Net profit in the full-year fell 72% to Sfr 69 million or compared to net profit of Sfr 245 million, a year earlier.

Europe Markets Review

In London FTSE 100 Index closed lower 34.29 or 0.89% to 3,816.44, in Paris CAC 40 Index decreased 19.82 or 0.73% to close at 2,708.05 and in Frankfurt DAX index lower 40.70 or 1.03% to close at 3,895.75. In Zurich trading SMI decreased 74.10 or 1.54% to close at 4,723.02.