German Confidence Falls; Norway Cuts Rate

123jump.com Staff
25 Mar, 2009
New York City

European stocks closed higher despite a weaker than expected business confidence index in Germany. Inditex reported flat same store sales and annual earnings rise of 3% on international sales increase. Norway cuts its rate to 2%. Siemens cautioned that market conditions are deteriorating.

[R]1:00PM New York, 6:00 Frankfurt – European stocks closed higher despite a weaker than expected business confidence index in Germany. Inditex reported flat same store sales and annual earnings rise of 3% on international sales increase. Norway cuts its rate to 2%. Siemens cautioned that market conditions are deteriorating.[/R]

European stocks disregarded discouraging economic data generated and extended gains for a third day this week.

Business confidence in Germany, Europe’s largest economy slumped, to a record low since 1982. The business climate index dropped to 82.1 from 82.6 in February according to the report published by the Ifo Institute. The index of current conditions declined to 82.7 from 84.3 and expected conditions increased to 81.6 from 80.9.

Germany, the largest economy in Europe is expected to shrink between 5% and 8% in the current year and the ECB may be forced to lower the interest rate further from the record low of 1.5%.

Siemens, one of Germany’s largest engineering firms, fell 4% to 44 euros in Frankfurt after cautioning that markets were under a worsening stress. Demand in industrial and medical technology unit is weak and may force the company to miss its annual earnings target.

Trading was mixed for carmakers and financials.

The euro gained $1.3573 on news that the US was going to increase the use of IMF’s special drawing rights.

Spain based retailer Inditex reported fourth quarter earnings declined to 3.5% to 410 million euros. For the full year earnings increased 3% to 1.253 billion euros or 2.02 euros a share.

Norway Cuts Interest Rates

Central Bank in Norway lowered its overnight deposit rate by 0.5% to 2%. The krone declined 1.5% against the euro and traded at 8.72.

Norway’s economy is expected to shrink 1.7% this year and unemployment is estimated to rise to 3.7% from 2.6% in 2008. The inflation in Norway has hovered at 3% above the central bank’s target of 2.5% forcing the central bank to keep high interest rate.

Market Sentiment

In Frankfurt trading the DAX 30 Index advanced 0.9% or 35.93 to 4,223.39. Of the 30 DAX index shares, 13 rose, 16 fell and one traded flat.

Volkswagen led advancers with a gain of 10.4% followed by gains in Commerzbank of 9.8%, in Fresenius Medica of 5.6%, in Adidas AG of 3.8% and Metro AG of 3.3%.

Siemens AG-REG led decliners with a loss of 6.2% after the Germany engineering firm cautioned that markets were under a worsening stress, followed by losses in Deutsche Bank RG of 4.2%, in Deutsche Boerse AG of 3.5%, in Linde AG of 3.1% and Basf SEof 3.1%.

In Paris trading the CAC 40 climbed 0.7% higher to 2,893.45.

ST Microelectronics led advancers with a gain of 7.1% followed by gains in Unibail-Rodamco of 5.6%, in Renault of 4%, in Danone of 3.8% and Alcatel-Lucent of 3%.

Carmaker Peugeot led decliners with a loss of 5%, followed by losses in Alstom of 4.6%, in Credit Agricole of 3.6%, in Air France-KLM of 2.9% and EADS of 4.5%.

Germany Investor Confidence Tumbles to 26-year Low

The Info Institute in Munich today reported that business confidence in Germany, Europe’s largest economy fell the most in 26 years.

The institute’s business climate index dropped to 82.1 from 82.6 in February. That’s the worst reading in 26 years. The index is computed using a sample of 7,000 executives.

The gauge of current conditions fell from 84.3 to 82.7 while the measure of expectations rose from 80.9 to 81.6.

Inditex Profit Drops to Five-year Low

Inditex, one of the largest retailers in Europe reported net annual sales in 2008 rose 10% to 10.41 billion euros, an increase of 10% from 2007 and an increase of 12% on constant currency. Net income increased 3% to 1.253 billion for the year.

Same store sales covering 74% of stores were flat for the year after increasing at 1% in the first half and declining at 0.7% in the second half.

Sales in Spain account for 33.9% of total sales compared to 37.5% in 2007 and sales in the rest of Europe were 44.8% compared to 42.4%, in Asia were 10.5% compared to 9.4% and in Americas were 10.7% compared to 10.8% in 2007.

All retail concepts including Zara and Massimo Dutti reported rising sales outside Spain.

The company proposed payment of 1.05 euros to be paid in two installments of 0.55 euros in May and 0.50 euros in November of 2009.

Inditex expects to add 230,000 square meters, most of the new retail space in 2009 in international markets.

Europe Markets Review

In London FTSE 100 Index closed lower 11.21 or 0.29% to 3,900.25, in Paris CAC 40 Index increased 19.06 or 0.66% to close at 2,893.45 and in Frankfurt DAX index higher 35.93 or 0.86% to close at 4,223.29. In Zurich trading SMI increased 46.72 or 0.95% to close at 4,970.38.