The European markets ended Friday’s session with mixed results. The markets received a boost in early trade from the strong fourth quarter GDP data released by China. Investors were also encouraged by some positive earnings releases out of the United States, but the mood was soured by the sharp drop in U.S. consumer sentiment in the afternoon.
The Bank of Italy slashed its economic forecast for this year on Friday to project a worst contraction than expected earlier, citing the deteriorating external environment and the continuing weakness in domestic activity.
The bank now expects the Italian economy to shrink 1 percent this year, which is much worse than the earlier projection of 0.2 percent contraction. Gross domestic product likely declined just over 2 percent in 2012, the bank said in its latest economic bulletin.
International Monetary Fund (IMF) Managing Director Christine Lagarde urged nations to focus on real economy and on growth that can deliver jobs.
Speaking at a news conference in Washington on Thursday, Lagarde said policymakers have more work to do to and cannot revert to business as usual, though they succeeded in avoiding an economic collapse following the global financial crisis.
She said in euro area, continued monetary easing is needed to sustain demand. Also, progress needs to be made on banking union. “For the United States, all sides should pull together in the national interest, reaching agreement on time on increasing the debt ceiling and on medium-term debt reduction,” she added.
The effectiveness of the U.K. central bank’s asset purchases as a stimulus tool may have waned over the months, Bank of England Monetary Policy Committee External Member Ian McCafferty said on Friday.
The confidence on the asset purchases tool, otherwise called the quantitative easing, was the strongest when it was first introduced, the policymaker said in a speech in London. “The novelty of the instrument and the MPC’s readiness to act quickly to loosen policy further at a time of ultra-low interest rates no doubt acted to lift “animal spirits”,” he said.
The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.33 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.09 percent.
The DAX of Germany dropped by 0.43 percent and the CAC 40 of France fell by 0.07 percent. The SMI of Switzerland decreased by 0.82 percent, but the FTSE 100 of the U.K. gained 0.51 percent.
In Frankfurt, Metro declined by 1.36 percent. The stock was downgraded to ”Underperform” from ”Neutral” at Credit Suisse.
Commerzbank finished up by 1.93 percent, while Deutsche Bank lost 0.20 percent.
In Paris, Renault increased by 4.36 percent after announcing sales figures for 2012.
BNP Paribas gained 1.12 percent, while Societe Generale added 1.37 percent and Credit Agricole rose by 0.27 percent.
Loreal decreased by 0.05 percent. The stock was upgraded to ”Overweight” from ”Neutral” at HSBC.
In London, mining stocks were positive in early trade, following the Chinese GDP report. Rio Tinto increased by 1.85 percent, recovering from yesterday’s weakness. The company’s CEO stepped down on Thursday.
Meggitt advanced by 1.46 percent. Barclays upgraded its rating on the stock to “Overweight” from “Equalweight.”
J Sainsbury fell by 0.58 percent, after Goldman Sachs added the stock to its “Conviction Sell” list.
Spectris surged by 8.26 percent. The company reported higher like-for-like sales in its fourth quarter and fiscal 2012, despite a challenging trading environment.
China’s economic growth accelerated for the first time in two years in the fourth quarter underpinned by robust industrial output and investment, latest figures released by the National Bureau of Statistics showed Friday.
Despite the rebound in the final quarter, the growth rate for the full-year of 2012 sank to a 13-year low as prolonged crisis in euro area and weak demand for developed nations in general dampened the country’s exports.
The gross domestic product grew 7.9 percent year-on-year in the fourth quarter, snapping seven successive quarters of slowdown. Economists had expected a 7.8 percent gain. In the third quarter, GDP expanded 7.4 percent, the weakest pace in three years.
U.K. retail sales declined unexpectedly during Christmas season amid weak consumer demand, intensifying concerns about an economic contraction in the final quarter of 2012.
Retail sales including automotive fuel dropped 0.1 percent month-on-month in December, after staying flat in November, the Office for National Statistics showed Friday. It was in contrast to a 0.2 percent rise forecast by economists.
Confidence among British households about prices of their homes weakened for the thirty-first successive month in January, though at the slowest pace since July 2010, data from a survey by Markit Economics and Knight Frank showed Friday. The house price sentiment index came in at 47.6 in January, up from December’s reading of 47.1.
Consumer sentiment in the U.S. has unexpectedly deteriorated in the month of January, according to a report released by Thomson Reuters and the University of Michigan on Friday. The report showed that the preliminary reading on the consumer sentiment index for January came in at 71.3 compared to the final December reading of 72.9.
The drop by the consumer sentiment index came as a surprise to economists, who had expected the index to climb to a reading of 75.0.
by RTT Staff Writer
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