European Markets Pulled Back On Concerns Over Italy & U.S. Debt Ceiling
(RTTNews.com) - The European markets finished in negative territory on Friday. Investor sentiment continued to be impacted by concerns over a possible government shutdown in the U.S. The political situation in Italy was also in focus at the end of the trading week. Thursday's threat by the People of Freedom Party to leave parliament if former Prime Minister Silvio Berlusconi is expelled from it caused the yield on Italian government bonds to rise.
U.S. House Speaker John Boehner previewed upcoming House legislation at a press conference on Thursday that he said would tie an increase in the debt limit to spending cuts and pro-growth reforms. Noting that President Barack Obama has repeatedly refused to negotiate over raising the debt limit, Boehner said, "Well, I'm sorry, but it just doesn't work that way."
U.S. Treasury Secretary Jack Lew sent a letter to Congress on Wednesday warning that the extraordinary measures the Treasury is employing to preserve U.S. borrowing capacity would be exhausted no later than October 17.
Bank of England Governor Mark Carney said that he sees no case for more quantitative easing as the economic recovery has gained momentum. In an interview to the Yorkshire Post, Carney said that the Bank of England would consider the case for more quantitative easing should the recovery falter.
"But my personal view is, given the recovery has strengthened and broadened, I don't see a case for quantitative easing and I have not supported it," the newspaper quoted him as saying.
The Bank of England will study economic conditions in cities outside London before making any decision on a possible interest rate hike, Governor Mark Carney said in an interview to Liverpool Echo.
"It's incredibly important for me and my colleagues to get out of London and talk to businesses and find out what's really going on in the economy," he told the newspaper.
The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.20 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.30 percent.
The DAX of Germany dropped by 0.03 percent, but the CAC 40 of France gained 0.00 percent. The FTSE 100 of the U.K. decreased by 0.81 percent and the SMI of Switzerland lost 0.08 percent.
In Frankfurt, HeidelbergCement declined by 1.86 percent. HSBC downgraded its rating on the stock to ''Neutral'' from ''Overweight.''
Linde, which appointed a new chief executive, decreased by 0.91 percent.
Hugo Boss dropped by 0.92 percent, after Berenberg downgraded the stock to ''Hold'' from ''Buy.''
In Paris, Metal fabrication firm Vallourec said weakening of the Brazilian real against other currencies would have a negative translation impact on the second-half results. The stock plunged by 8.20 percent.
Berenberg upgraded Axa to ''Buy'' from ''Hold.' The stock finished up by 0.09 percent.
In London, Bunzl advanced by 0.37 percent. Goldman Sachs upgraded its rating on the stock to "Neutral" from "Sell."
Antofagasta declined by 2.75 percent and Vedanta Resources lost 2.72 percent. Rio Tinto dropped by 2.34 percent and Anglo American fell by 1.88 percent. BHP Billiton finished lower by 2.23 percent.
Michael Page climbed by 1.11 percent, after Goldman Sachs upgraded the stock to ''Buy'' from ''Neutral.''
Holcim fell by 0.80 percent in Zurich. The stock was downgraded to ''Neutral'' from Overweight'' at HSBC.
Vestas Wind Systems surged by 4.51 percent in Copenhagen. The wind turbine maker has agreed to form a joint venture with Japanese Mitsubishi Heavy Industries Ltd. for offshore wind energy.
Eurozone economic confidence rose more than expected to a 25-month high in September, with marked strength across all business sectors, averting fears of a near-term relapse in activity. The economic confidence index rose for the fifth month in a row to 96.9 in September, the highest level since August 2011, from a revised 95.3 in August, the European Commission said Friday. The reading was also above the consensus estimate of 96.
An indicator of current economic situation in the euro area recorded a positive value for the first time in two years in September, a report from the Bank of Italy showed Friday. The eurocoin indicator rose to 0.12 in September from -0.04 in August and -0.09 in July.
Germany's EU harmonized inflation remained unchanged in September, in line with economists' expectations, latest data showed Friday. The harmonized index of consumer prices (HICP) advanced 1.6 percent on annual basis in September, which was unchanged from the growth rate seen in August, preliminary estimates released by the Federal Statistical Office revealed. The outcome matched economists' expectations.
The French economy exited recession as initially estimated in the second quarter, final data from the statistical office Insee revealed Friday. Gross domestic product gained 0.5 percent from a quarter ago. This was the fastest growth rate recorded since the first quarter of 2011, Insee said.
Consumption among French households decreased at a faster-than-expected pace in August, after rising modestly in the previous month, latest data showed Friday. The consumer spending index dropped a seasonally adjusted 0.4 percent month-on-month in August, reversing the previous month's upwardly revised 0.4 percent increase, statistical office Insee said. Economists were looking for a more modest contraction of 0.3 percent for August.
Italy's business confidence improved significantly in September, and reached the highest level in more than two years, a report released by statistical office Istat showed Friday. The business confidence index, which measures sentiment among Italian manufacturing firms, advanced to 96.6 in September from 93.4 in the previous month. Economists had forecast the index remain unchanged at the August level.
British consumer sentiment reached its highest level in nearly six years in September as households turned more confident about the economy achieving sustainable growth, a survey by market research group GfK showed Friday. The headline consumer confidence index rose to -10 in September, the highest reading since November 2007, from -13 in August. The index topped the -11 reading forecast by economists.
An indicator of British service sector output increased in July, data from the Office for National Statistics showed Friday. The index of services increased 0.2 percent month-on-month in July. This, however, was weaker than the expected 0.5 percent rise. The indicator was flat between May and June.
U.K. productivity improved for the first time in two years, data published by the Office for National Statistics showed Friday. Output per hour rose by 0.5 percent sequentially in the second quarter, growing for the first time since the second quarter of 2011. At the same time, output per worker climbed 0.5 percent after climbing 0.3 percent in the preceding quarter.
House prices in the UK increased at a faster pace in September, a survey by the Nationwide Building Society showed Friday. The house price index rose 0.9 percent month-on-month in September, faster than a 0.7 percent increase in August. The gain was stronger than the expected 0.5 percent increase. The typical UK home is now worth GBP 172,127.
Switzerland's leading economic indicator increased at a notably faster rate in September, continuing the upward trend started in April, in a sign that economic growth in the coming months will be positive, data from a survey by research firm KOF showed Friday. The KOF Economic Barometer increased notably to 1.53 in September from 1.37 in August, which was revised up from 1.36. Economists were looking for a score of 1.45.
Personal income and spending in the U.S. both rose in line with economist estimates in the month of August, according to a report released by the Commerce Department on Friday.
The report said personal income rose by 0.4 percent in August following an upwardly revised 0.2 percent increase in July. The acceleration in the pace of growth matched expectations.
Additionally, the report said personal spending increased by 0.3 percent in August after rising by an upwardly revised 0.2 percent in the previous month. The spending growth came in line with estimates.
Thomson Reuters and the University of Michigan released a report on Friday showing an upward revision to their reading on U.S. consumer sentiment in the month of September, although the index still pointed to deterioration in sentiment compared the previous month.
The report showed that the final reading on the consumer sentiment index for September came in at 77.5, above the preliminary reading of 76.8 but still below the final August reading of 82.1.
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