European Markets Rallied On China Data & Easing Syria Concerns
(RTTNews.com) - The European markets finished solidly to the upside Tuesday, rebounding from yesterday's weakness. The markets rallied on continued strong economic data from China and easing concerns over a potential U.S. military strike on Syria. The Syrian government has reportedly accepted a Russian proposal to give up its chemical weapons. U.S. President Obama will give a speech to the American public this evening, which was expected to address the need for military intervention in Syria.
The Russian proposal calls for Syria to put its chemical weapons stores under international control with plans for their subsequent destruction. The proposal also calls for Syria to ratify the Chemical Weapons Convention, which outlaws the production, stockpiling, and use of chemical weapons.
The string of positive economic data from China continued, suggesting that the world's second largest economy may have started to recover in the third quarter, shrugging off the recent weakness, which was largely the result of an ongoing restructuring.
Data from the National Bureau of Statistics revealed Tuesday that industrial production increased 10.4 percent year-on-year in August compared with forecast of 9.9 percent growth. This was the strongest growth recorded in 17 months. In July, output grew 9.7 percent.
Retail sales were up 13.4 percent annually during the month, faster than the 13.3 percent increase expected by economists. This followed the 13.2 percent rise in the previous month.
Bank of Italy Governor Ignazio Visco said the Single Resolution Mechanism (SRM), a component of the banking union, should proceed expeditiously.
However, during the transition to the SRM, the risk of a vicious circle between a fiscally weak sovereign state and its fragile domestic banks persists, Visco, who is also a member of the European Central Bank governing board said in Rome on Tuesday.
After the effective operation of Single Supervisory Mechanism, the permanent bailout fund will only be able to directly recapitalize banks - with the aim of restoring their viability and obtaining a remuneration of the capital invested, he noted.
International Monetary Fund chief Christine Lagarde has reportedly urged national governments in Eurozone to expedite the procedures to form a complete banking union in the region, reports said Tuesday.
"We very much think of the euro area as a beautiful ship that has been built, reared, for the soft seas, but not yet completely finished for the rough waters," Lagarde said during a conference at the French Finance Ministry in Paris.
Speaking at the same conference, France's Finance Minister Pierre Moscovici said his country wants the Eurozone to have its own budget, which can be used to finance a shared unemployment insurance system, he said.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 1.92 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 1.07 percent.
The DAX of Germany climbed by 2.06 percent and the CAC 40 of France advanced by 1.89 percent. The FTSE 100 of the U.K. rose by 0.82 percent and the SMI of Switzerland gained 1.30 percent.
Airline stocks performed well Tuesday, as easing concerns over Syria led to a decrease in the price of oil. Lufthansa climbed by 5.87 percent in Germany and Air France rose by 9.09 percent in Paris.
Automakers were also strong, due to the start of the Frankfurt auto show. Volkswagen advanced by 4.12 percent in Germany. Daimler and BMW also gained 2.56 percent and 1.56 percent respectively. Renault climbed by 1.39 percent in France and Peugeot added 1.82 percent.
In Frankfurt, Siemens increased by 1.29 percent. The industrial conglomerate rose on reports that it plans to cut 340 jobs at the Erlangen site of its rail division.
Deutsche Telekom rose by 0.87 percent. Bloomberg reported that it has chosen four private equity firms to proceed with bids for a 30 percent stake in online classified advertising business Scout24.
In Paris, Technip advanced by 1.56 percent. The company said its operating center in Rome, Italy, has reached a deal with China Huanqiu Contracting & Engineering Corp. to set up two joint-venture companies.
In London, Glencore Xstrata climbed by 2.32 percent. The commodities trader and natural resources firm said it currently estimates synergies of at least $2 billion or about 1.27 billion pounds for 2014 from the merger of Xstrata Plc., which is significantly up from the initial merger guidance of $500 million.
GlaxoSmithKline fell by 2.53 percent, after Citigroup downgraded the stock to "Neutral" from "Buy."
Repsol gained 3.57 percent in Madrid. The Spanish oil firm has consulted its financial adviser Citigroup Inc. and Deutsche Bank AG on the possible sale of its 4.4 billion euros stake in Gas Natural, the Financial Times reported, citing people familiar with the matter.
French industrial and manufacturing output contracted in July from June, data from the statistical office Insee revealed Tuesday. Industrial output declined unexpectedly by 0.6 percent in July from the previous month, albeit at slower than June's 1.4 percent decline. Production was expected to increase by 0.5 percent.
House prices improved in the United Kingdom in August. The House Price Balance reported by the Royal Institution of Chartered Surveyors was Plus-40, up from Plus-37 in July. The Plus-40 reading matched the expectations of most economists.
The Italian economy contracted at a slightly faster pace in the second quarter than initially estimated, but at a weaker rate than in the March quarter, final data from statistical office Istat showed Tuesday.
Gross domestic product (GDP) dropped a seasonally and calendar-adjusted 0.3 percent quarter-over-quarter in the June quarter, a tad faster than the 0.2 percent fall estimated earlier. In the first quarter, the economy had logged a faster contraction of 0.6 percent.
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