Sep 27, 2012
Stocks and Markets in the News | European Markets at Close Report | MarketWatch -September 27, 2012-. -
By Sara Sjolin, MarketWatch
LONDON (MarketWatch)—European stock markets ended a highly volatile trading day on an upbeat note, while Spanish equities closed lower after the government released its much anticipated 2013 budget with little surprises.
The Stoxx Europe 600 index XX:SXXP +0.34% added 0.3% to 271.65, claiming back some losses from Wednesday, when the benchmark tumbled 1.8% on concerns over Spain and Greece.
“It’s a correction from yesterday. There is nothing fundamental that is driving the moves,” said Tobias Blattner, European economist at Daiwa Capital Markets.
Spain stole the limelight on Thursday, as the government, three hours later than expected, announced its budget for next year and outlined economic reforms. The government said it plans to tap 3 billion euros ($ 3.86 billion) from its pension reserves to cover some needs in the Treasury, and that its focus is more on spending cuts than tax hikes. Budget minister Cristobal Montoro Romero said the government expects to meet its 2012 deficit target of 6.3% and is targeting a 4.5% deficit in 2013. See: Spain gov't: More spending cuts than tax hikes .
n recent days Spaniards have hit the streets of Madrid in protests over budget cuts, while international financial markets have speculated over whether the administration will submit an official request for aid.
The IBEX 35 index XX:IBEX -0.15% fell 0.2% to 7,842.30.
“As it stands this budget lacks any credibility and the question is whether these measures are enough to ward off any additional conditionality the [European Central Bank] may require under an [outright monetary transaction] program, which they are more than likely going to have to ask for,” said Ioan Smith, managing director at Knight Capital Europe, in a note after the release.
“Despite assurances we still contend that Spain will struggle to meet its deficit this year and the fact that the budget is based on unchanged economic forecasts means that immediately lacks any credibility,” he said.
The yield on 10-year Spanish government bonds ES:10YR_ESP +0.0064% surged above 6% for the first in almost three weeks on Wednesday, but was down 12 basis points to 5.91% on Thursday, according to electronic trading platform Tradeweb.
Elsewhere, The Wall Street Journal reported Thursday that leaders of Greece’s three-party coalition have agreed to comply with the bulk of austerity measures required by international creditors in exchange for additional loans from the Greek bailout package. See: Greek coalition agrees on bulk of cuts.
In the U.S., a batch of data painted a mixed picture of the economy and weighed on trading sentiment. Initial jobless claims from last week fell by 26,000 to 359,000, marking the lowest level since late July and beating analysts’ expectations. See: U.S. jobless claims fall 26,000 to 359,000.
Meanwhile, economic growth for the second quarter was revised down to 1.3% from a previous estimate of 1.7%, while durable-goods orders sank 13.2% in August, the biggest one-month decline in more than three years. See: U.S. orders for durable goods sink 13.2% in August and See: Second-quarter U.S. GDP revised down to 1.3%.
Weak pending home sales further added pressure in afternoon trade. See: Pending home sales retreat after hitting 2-yr high.
“Today’s data were a narrow reflection of what we’ve seen over the last couple of months and strengthened the case for the [U.S. Federal Reserve] to launch further [quantitative easing],” Blattner from Daiwa Capital Markets said.
“We need to see the effect on data coming in October. Market participants expect the Fed to extend the program to also involve the buying of Treasurys and not just [mortgage-backed securities],” he said.
U.S. stocks traded higher on Wall Street. See: U.S. stocks rise as job picture brightens.
Elsewhere, Hennes & Mauritz AB SE:HMB -5.76% shares were among notable movers. They dropped 5.8% after the retailer’s third-quarter profit missed market expectations. The fashion retailer further said it postponed its online launch in the U.S. until the summer of 2013. See: H&M Q3 net lags views; U.S. online start delayed.
In the U.K., resource firms were on the rise on hopes of market-boosting measures from China. Read: China stocks soar to lead upbeat Asia.
Miner Rio Tinto PLC UK:RIO +1.51% RIO +1.42% AU:RIO +1.32% gained 1.5%, while oil major BP PLC UK:BP +0.51% BP +1.35% picked up 0.5%. Oil futures and metals were also higher. See: Gold prices crawl back from two-week lows.
Heavyweight bank HSBC Holdings PLC UK:HSBA +1.01% HBC +1.42% HK:5 +0.34% took on 1%. The FTSE 100 index UK:UKX +0.20% closed up 0.2% to 5,779.42.
Recruitment firm Hays PLC UK:HAS -1.87% dropped 1.9%, as Credit Suisse cut the stock to neutral from outperform.
In France, Credit Agricole SA FR:ACA +3.82% added 3.8% and Société Générale SA FR:GLE +1.63% gained 1.6%. The CAC 40 index FR:PX1 +0.72% was up 0.7% to 3,439.32.
Utility firm RWE AG DE:RWE +1.28% added 0.7% after HSBC lifted the stock to overweight from underweight.
The DAX 30 index DX:DAX +0.19% rose 0.2% to 7,290.02.
Sara Sjolin is a MarketWatch reporter, based in London.
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