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Europe close: US and China gloom hits Europe

Date: Thursday 21 Jun 2012

Europe close: US and China gloom hits Europe

- Spain completes successful bond auction
- Stocks down on US and China gloom
- Air France to slash 5000 jobs

FTSE 100: -0.99%
Dax 30: -0.77%
Stoxx 600: -0.36%
Cac 40: -0.39%
Ibex 35: -0.33%
FTSE MIB: +0.14%

European markets were broadly down by the close as bad news from the US and China outweighed a slight improvement in Spanish debt yields.

Last night the Federal Reserve confirmed it would be extending so called “Operation Twist”, whereby it exchanges short term securities for longer term securities. The idea is to make borrowing costs lower.

The US central bank also lowered its annual growth forecast to between 1.9 - 2.4% for 2012, down from the 2.4% to 2.9% forecast in April.

A purchasing manager’s index (PMI) for China released today gave a reading 48.1 for the manufacturing sector. A reading below 50 suggests contraction.

The picture was slightly brighter in Europe where a PMI of both the manufacturing and service sectors gave a reading of 46, slightly better than analysts had been expecting.

Meanwhile, Spain exceeded its maximum target at an auction of bonds with maturities between two and five years. The country sold €2.2bn worth of debt against a target of €2bn.

COMPANIES

The Air France-KLM group rose 6% on news of a cull of up to 5000 jobs at Air France.

The strong Spanish debt sale saw Italian and Spanish banks on the rise with both Unicredit and Bankia posting strong gains.

The strongest sector on the Stoxx Euro 600 was healthcare, which rose 0.64%, basic resources fell 2.9% as commodity prices fell.

OTHER MARKETS

By 16:53 in London the euro was down 0.98% against the dollar at $1.2583.

Futures contracts for front month delivery of Brent crude had fallen 2.23% by 16:39 to hit $90.62 per barrel.

BS

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