The majority of the European markets pulled back on Monday, following the strong gains posted at the end of the previous week. Friday’s rally was sparked by the better than expected U.S. jobs report for February. The weakness at the start of the new trading week was due to a strong rebound in the Chinese inflation data and the downgrade of Italy’s credit rating by Fitch.
Fitch Ratings on Friday downgraded the credit ratings for Italy, stating that the continued political stalemate after the inconclusive elections last month may deliver an adverse shock to the already crippled economy.
Fitch lowered Italy’s long-term foreign and local currency Issuer Default Ratings (IDR) to ‘BBB+’ from ‘A-‘. The Outlook on the Long-term IDRs is ‘negative.’
In a statement, the rating agency said “the inconclusive results of the Italian parliamentary elections on 24-25 February make it unlikely that a stable new government can be formed in the next few weeks.”
“The increased political uncertainty and non-conducive backdrop for further structural reform measures constitute a further adverse shock to the real economy amidst the deep recession,” it added.
Inflation in China rebounded strongly to hit a ten-month high in February, while other indicators softened to signal slowing recovery of the world’s second largest economy.
Data released by the National Bureau of Statistics on Saturday revealed that the consumer price inflation rose to 3.2 percent in February from 2 percent in January. This exceeded forecast of 3 percent and was the highest rate since April last year.
The German Finance Ministry plans to cut net borrowing next year, more deeply than projected in the government’s medium-term plan, Der Spiegel reported on Sunday citing government sources. The borrowing will be reduced to EUR 6-8 billion in 2014 from EUR 17.1 billion planned for this year.
Lower interest rates are not being passed on fully by banks in some countries, Vitor Constancio, Vice-President of the European Central Bank said Monday. As bank funding is tight, rate reductions are passed on hardly, making credit unduly expensive in some parts of the euro area, said Constancio in a speech at Chatham House, London.
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 0.05 percent.
The DAX of Germany rose by 0.01 percent and the CAC 40 of France fell by 0.10 percent. The SMI of Switzerland climbed by 0.09 percent and the FTSE 100 of the U.K. gained 0.16 percent.
In Frankfurt, Continental declined by 1.28 percent. Morgan Stanley downgraded the stock to ”Equalweight” from ”Overweight.”
Bayer fell by 1.02 percent, after Citigroup removed the stock from its Focus List.
Deutsche Bank finished lower by 1.11 percent, while Commerzbank ended the session down by 0.62 percent.
Car parts maker ElringKlinger dropped by 4.68 percent, after several brokerages reduced their rating on the stock.
Nordex surged by 13.99 percent. The wind turbines maker reported adjusted earnings before interest and taxes of 14 million euros, compared to a loss of 7.6 million euros last year.
In Paris, STMicroelectronics fell by 1.54 percent. The chipmaker said Didier Lamouche, Chief Operating Officer, whose operational role was suspended when he took the assignment as President and Chief Executive Officer at ST-Ericsson in December 2011, has decided to resign from the company effective March 31, to pursue other opportunities.
Veolia Environnement declined by 2.49 percent, after Goldman Sachs downgraded the stock to “Neutral” from “Buy.”
Arcelor Mittal climbed by 1.15 percent. UBS upgraded the stock to ”Buy” from ”Neutral.”
In London, ICAP dropped by 4.29 percent. UBS downgraded the stock to ”Sell” from ”Neutral.”
SABMiller increased by 1.50 percent, reportedly on a broker upgrade.
Sage Group fell by 2.12 percent, after Bank of America Merrill Lynch downgraded it to “Underperform” from “Neutral.”
Kuehne & Nagel lost 1.14 percent in Zurich. Nomura downgraded the stock to ”Neutral” from ”Buy.”
Germany’s exports grew at the fastest pace since August 2012 and imports recovered strongly in January, boosting hopes of recovery at the start of the year. Shipments grew 1.4 percent in January from a month ago, when it rose 0.2 percent, data from the Federal Statistical Office showed Monday. The increase in exports far exceeded the 0.5 percent rise forecast by economists.
Likewise, imports advanced 3.3 percent, sharper than the 0.7 percent growth expected by economists. Moreover, the import performance reversed December’s 1.5 percent drop. The import growth outpaced the export growth in January.
The trade surplus increased less than expected to EUR 13.7 billion in January from EUR 12.1 billion in the previous month. The surplus was expected at EUR 14.4 billion.
France’s industrial production declined more than expected in January, the latest figures from statistical office Insee showed Monday. Production fell 3.5 percent year-on-year in January, compared to expectations for a 2.8 percent decline. Also, the rate of fall was steeper than the 1.9 percent decrease in the previous month.
by RTT Staff Writer
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