Europe open: Merkel balks at bond purchases

Date: Thursday 21 Jun 2012

-Spanish bank audit due
-Spanish debt auction on tap
-Merkel balks at sovereign debt purchases-Bbg
-Finnish parliament ratifies ESM
-Banks deposit €779.8bn overnight at ECB
-Greek coalition leaders to meet at 11AM
-Fed lowers US growth forecasts, weak China data
-Mixed Eurozone economic data
-Berlusconi raises specter of early vote-WSJ
-ECB´s Coeure says EFSF should buy bonds-FT

FTSE-100: 0.70%
Dax-30: -0.79%
Cac-40: -0.64%
Stoxx 600: -0.66%
FTSE-Mibtel: -0.85%

The main European equity benchmarks have begun the day with moderate losses, with market commentary attributing the moves chiefly to a less aggressive than hoped for Federal Reserve and weak Chinese manufacturing data out overnight.

In particular, some observers saw a chance that the US central bank would announce another round of fully-fledged quantitative easing. As well, the Fed lowered its growth forecasts for the American economy this year.

No less relevant, the latest reports indicate that Chancellor Angela Merkel´s remarks yesterday evening, regarding the possibility of the European rescue funds purchasing sovereign bonds directly, may have been somewhat prone to misinterpretation. Thus, and according to Bloomberg, her complete remarks were, “there is no concrete planning that I know about, but there is the possibility of purchasing sovereign bonds on the secondary market (…) but this is a purely theoretical statement about the legal situation.” She has added that this option is not “up for debate (at present).”

For some observers the speculation surrounding possible Eurozone debt purchases on the secondary market have been an important factor behind the recent rally.

Against that backdrop, the Spanish Treasury will today auction up to €2bn in medium-term debt.

Telefónica and KPN just can´t see eye to eye

Chinese firms Hebei and Baosteel are interested in buying Thyssenkrupp's steel plant in Brazil, the FTD reports.

KPN, the Dutch telecom group's attempt to sell its German unit to Spain's
Telefonica has fallen through.

Airbus expects to sell at least 30 A380 superjumbos this year, a senior
executive said, according to Reuters.

From a sector stand-point the worst performing sectors on the DJ Stoxx 600 now are: basic resources (-2.83%), automobiles (-1.76%) and oil (-1.5%).

Mixed economic data

The Eurozone manufacturing sector purchasing managers´ index for the month of June has come in at 44.8 points (Consensus: 44.9) below previous month´s reading of 45.1.

The Eurozone service sector purchasing managers´ index for the month of June has come in at 46.8 points (Consensus: 46.4) below previous month´s reading of 46.7.

Oil skids lower

Front month Brent futures are down by 0.379 dollars, to the 92.34 dollar mark, after the US Energy Department yesterday reported an unexpected increase in weekly oil inventories.

AB

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