European Markets Finished Mixed After British Unemployment Report

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(RTTNews.com) - The European markets ended Wednesday's session with mixed results. The markets were positive in early trade after the International Monetary Fund upgraded its global growth forecast. However, investors became concerned that the Bank of England may decide to hike interest rate earlier than previously expected, following the larger than expected drop in the U.K. unemployment rate.

The International Monetary Fund on Tuesday upgraded its global growth outlook as economic conditions in advanced economies continued to improve, while urging rich nations to maintain accommodative monetary policy stance, given significant downside risks.

Releasing the World Economic Outlook (WEO) Update, the Washington-based lender said it now expects the world economy to grow 3.7 percent this year, stronger than the 3.6 percent expansion projected in the October report. Growth is seen rising to 3.9 percent in 2015, broadly unchanged from the October outlook.

The euro area is turning the corner from recession to recovery, IMF said. Growth is projected to strengthen to 1 percent in 2014 and 1.4 percent in 2015, though the recovery will be uneven. In October, IMF predicted 0.9 percent and 1.3 percent expansion for 2014 and 2015, respectively.

The outlook for Germany and Spain was upgraded from that in October, while the forecasts for France was left unchanged. Activity in Italy is expected to be weaker than projected earlier in 2014, though it is seen improving in 2015.

Policymakers of the Bank of England were unanimous in the decision to hold the interest rate and quantitative easing at the meeting held on January 8 and 9, the minutes of the meeting showed Wednesday.

The nine-member Monetary Policy Committee voted to retain the 0.50 percent record low interest rate and quantitative easing at GBP 375 billion.

With unemployment remaining above the 7 percent, the Committee's policy guidance remained in place and no member thought it appropriate to tighten, or to loosen, the stance of monetary policy at the current juncture, the minutes said.

Members assessed that there is no immediate need to raise Bank Rate even if the 7 percent unemployment threshold were to be reached in the near future. "When the time did come to raise Bank Rate, it would be appropriate to do so only gradually," the minutes said.

European Central Bank Executive Board member Benoit Coeure said on Wednesday that the proposed mechanism to deal with bank failures must be implemented earlier than planned.

In a speech delivered in Brussels, Coeure said the Single Resolution Mechanism (SRM) should allow for lean decision-making during emergencies. He also sought "robust and common" resolution financing arrangements.

"In this regard, the period of ten years for moving towards a genuinely common Single Resolution Fund (SRF) is too long and should be shortened, possibly to five years," Coeure said.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.02 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.05 percent.

The DAX of Germany dropped by 0.10 percent, but the CAC 40 of France gained 0.03 percent. The FTSE 100 of the U.K. fell by 0.12 percent and the SMI of Switzerland decreased by 0.23 percent.

In Frankfurt, Deutsche Bank declined by 0.58 percent, while Commerzbank lost 1.25 percent. Deutsche Bank needs to achieve its planned cost and revenue goals to boost operating performance and stay in line with its global trading and universal bank peers, Fitch Ratings said in a report.

Allianz dropped by 1.17 percent. The insurer said that Mohamed El-Erian has resigned as Chief Executive Officer and Co-Chief Investment Officer of its U.S.-based Asset Management subsidiary, PIMCO, effective mid-March.

In Paris, Credit Agricole fell by 0.54 percent. The lender has agreed to sell its Bulgaria division to Bulgarian bank Corporate Commercial Bank as part of efforts to reduce its risk-weighted assets and lower its solvency ratios.

Peugeot surged by 5.76 percent. Moody's Investor Service made positive comments regarding the auto-maker's to raise EUR3.0 billion through a capital increase.

In London, Sage Group increased by 3.34 percent. The business software firm said its performance since the start of its 2013/14 fiscal year remains in line with expectations.

Royal Bank of Scotland decreased by 3.06 percent. Barclays declined by 0.86 percent and HSBC lost 0.74 percent.

ABB tumbled by 3.55 percent in Zurich. The engineering firm warned it would miss fourth-quarter profit expectations due to storm-related project delays and some operational issues in the Power Systems division.

Shares of ASML Holding surged by 6.99 percent in Amsterdam. The semiconductor equipment maker reported higher profit for the fourth quarter and backed its expectations for the first half of 2014.

The gross debt of Eurozone governments narrowed in the third quarter, marking the first decline in nearly six years, in a further sign that the region's long-drawn debt crisis is easing, data released by Eurostat revealed Wednesday.

Total government debt in the 17-country bloc dropped to 92.7 percent of gross domestic product (GDP) at the end of the September quarter from 93.4 percent in the second quarter. It was the first decline since the fourth quarter of 2007.

Unemployment rate in the United Kingdom declined more than expected in the three months to November, the latest figures from the Office for National Statistics showed Wednesday. The jobless rate for the September-November period was 7.1 percent, just a tad above the Bank of England's threshold for increasing interest rates.

This was the lowest rate ever recorded since December-February period of 2009. In June-August, the jobless rate stood at 7.7 percent. Economists had forecast a decrease to 7.3 percent.

The U.K. budget deficit narrowed by GBP 2.1 billion from the previous year to GBP 12.1 billion in December, the Office for National Statistics showed Wednesday. The deficit was below the expected level of GBP 14 billion.

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