The European markets ended Friday’s session with mixed results. The larger than expected increase in Chinese inflation raised concerns over further policy easing to support an ongoing economic recovery. Investors also remained focused on the earnings reports from the United States. Wells Fargo, the first bank to report results, topped expectations but its net interest margin declined 8 percent. Japanese Prime Minister Shinzo Abe also announced a massive spending package to revive the economy.
Japan on Friday approved a fresh round of stimulus spending worth JPY 10.3 trillion ($116 billion) to jump-start the flagging economy, as Prime Minister Shinzo Abe signals determination to fulfill his campaign pledges.
Speaking at a press conference, Abe said the measures will include spending on public works, disaster prevention and financial aid for small firms. He said that the new measures would add 2 percentage points to the gross domestic product and create about 600,000 jobs.
The Italian bond auction proved to be eventful at the end of the week. The treasury sold 3.5 billion euros of three-year bonds, with a yield of 1.85 percent. This is the first time the yield has dropped below 2 percent since March of 2010.
The German economy started positively in the new year and swiftly overcome the temporary weakness, the Economics Ministry said Friday. The economy appears to have contracted in the fourth quarter, it said. The indicators show a significant decline in economic output in the fourth quarter.
Exports were weaker due to low global growth. However, the ministry sees a gradual recovery in exports later this year with improvement in global economic situation.
Debt restructuring is not an option for Cyprus, Economic and Monetary Affairs Commissioner Olli Rehn said in an interview to German daily Handelsblatt, published Friday. There are a number of other options on the table to make the country’s debt sustainable, he told the daily. Rehn also urged the government to tackle the issue of money laundering.
The European countries, in particular Germany, have expressed reluctance to lend money to Cyprus unless it counters the menace with strict regulations. Cyprus asked for bailout in June last year.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.29 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.16 percent.
The DAX of Germany rose by 0.09 percent and the CAC 40 of France advanced by 0.08 percent. The FTSE 100 of the U.K. climbed by 0.26 percent and the SMI of Switzerland gained 0.68 percent.
In Frankfurt, Commerzbank sank by 3.47 percent while Deutsche Bank gained 0.17 percent.
Salzgitter decreased by 3.30 percent, following a broker downgrade.
Goldman Sachs upgraded Daimler to ”Conviction Buy” from ”Buy.” Daimler finished with a gain of 0.44 percent. BMW and Volkswagen finished higher by 0.05 percent and 1.64 percent respectively.
Praktiker climbed by 9.40 percent, after Berenberg upgraded the stock to ”Buy” from ”Sell.”
Sky Deutschland dropped by 1.01 percent, after Merrill Lynch downgraded the stock.
In Paris, Tire firm Michelin fell by 2.05 percent and utility EDF decreased by 1.62 percent. Both stocks received negative broker recommendations.
BNP Paribas and Societe Generale rose by 0.65 percent and 0.60 percent, while Credit Agricole finished up by 0.44 percent.
Cap Gemini gained 2.34 percent, after peer Infosys in India lifted its annual revenue guidance.
In London, Barclays rose by 1.71 percent and Royal Bank of Scotland added 1.01 percent. Both stocks were upgraded at HSBC.
International Consolidated Airlines climbed by 5.43 percent, after UBS upgraded the stock to “Buy” from “Neutral.”
Aviva advanced by 3.29 percent, after Citigroup upgraded the stock to “Buy” from “Neutral.”
Tullow Oil dropped by 3.18 percent. The oil and gas firm expects to take $670 million in write off for the year.
Marks & Spencer finished higher by 1.00 percent, after HSBC downgraded it to “Neutral” from “Overweight.”
Severn Trent dipped by 0.82 percent, after HSBC downgraded the stock to “Neutral” from “Buy.”
Mining stocks turned in a weak performance, due to the inflation data out of China. Rio Tinto declined by 1.24 percent and BHP Billiton lost 2.67 percent. Anglo American decreased by 1.67 percent and Kazakhmys fell by 2.12 percent.
Inflation in China accelerated to the highest level in seven months in December, as the recent cold weather pushed up food prices, the latest figures from the National Bureau of Statistics showed Friday.
The consumer price index rose 2.5 percent year-on-year in December, the fastest pace since May this year, compared to a 2 percent rise in the previous month. Economists expected the rate of inflation to increase to a more modest 2.3 percent.
France’s current account shortfall remained unchanged from the previous month in November, data released by the Bank of France showed Friday. The current account deficit remained unchanged at EUR2.9 billion in November, the agency said.
U.K. manufacturing output declined unexpectedly in November in yet another blow to hopes of a recovery in the final quarter of 2012.
Manufacturing output decreased 0.3 percent in November from a month ago, when it dropped 1.3 percent, the Office for National Statistics showed Friday. Output was forecast to grow 0.5 percent.
Meanwhile, industrial output rose 0.3 percent month-on-month, underpinned by robust mining output. The November increase reversed last month’s 0.9 percent fall, but the rate of growth was smaller than the 0.8 percent rise forecast by economists.
House prices in the U.K. stayed unchanged from the previous month in December, data from a survey by mortgage services provider Acadametrics and LSL Property Services Plc showed Friday. The average price of a home in England and Wales remained broadly unchanged month-on-month at GBP227,026 in December, after recording a 0.2 percent increase in the previous month.
The U.S. trade deficit unexpectedly widened in the month of November, according to a report released by the Commerce Department on Friday, with a jump in imports more than offsetting an increase in exports. The report showed that the trade deficit widened to $48.7 billion in November from a revised $42.1 billion in October. The trade deficit for November reflected the widest U.S. trade deficit since a $49.6 billion deficit in April.
The wider deficit surprised economists, who had expected the deficit to narrow to $41.1 billion from the $42.2 billion deficit originally reported for the previous month.
U.S. import prices fell for the second consecutive month in December, the Labor Department revealed in a report on Friday, with the modest decrease coming as a surprise to economists. The report showed that import prices edged down by 0.1 percent in December following a revised 0.8 percent drop in November. Economists had expected prices to inch up by 0.1 percent compared to the 0.9 percent drop originally reported for the previous month.
The report also showed that export prices dipped by 0.1 percent in December after falling by 0.7 percent in the previous month. The drop came in line with economist estimates.
by RTT Staff Writer
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