LONDON (SHARECAST) - -Implementation of Basel III may be pushed back –Bbg
-US data helps to trigger bounce in equities
-S&P downgrades Spain to one notch above junk
-French CPI undershoots significantly
-German institutes cut 2013 GDP forecasts
-Banks deposited 242.9bn euros overnight at the ECB
FTSE-Mibtel 30: 1.26%
Ibex 35: 0.87%
Stoxx 600: 0.79%
European equities finished the day firmly higher, bouncing back from the last few days’ losses despite ratings agency Standard&Poor’s decision, last night, to downgrade Spain’s credit rating to just one notch above junk status, at BBB-.
Significantly, Spanish debt was similarly well-behaved and the price action may reawaken talk that ratings companies are now largely “irrelevant,” comment analysts at Digital Look, although “this is premature” they add. Thus, it remains to be seen just what would happen should S&P or the other ratings agencies really lower the country’s debt to junk status, which would force many fund managers to pare their holdings.
In a similar vein, analysts at ING pointed out that Spain's bonds are already trading at "junk" levels.
Helping matter perhaps, some observers were speculating with the possibility that S&P’s decision could serve to nudge Spanish authorities towards a bail-out decision. Better than expected weekly unemployment figures Stateside also fuelled gains towards the end of the session. That data however may have been distorted by problems related to the seasonal adjustment.
Positive as well, Bloomberg reported near the end of trading that European authorities may opt to postpone the implementation of the Basel III capital rules.
German Finance Minister Wolfgang Schaeuble said today euro-area governments have agreed that any decision on Greece will be taken after the IMF, the European Commission and the ECB publish their review. That after IMF Managing Director Christine Lagarde said today that Greece should get two years to meet fiscal targets. Furthermore, she suggested debt reductions are needed before a €130bn ($167bn) bailout can proceed.
Germany’s leading economic institutes revised their forecasts for German GDP growth in 2013 to 1% from 2% previously, while at the same time accusing the ECB of risking an inflationary pay-back through its bond repurchase initiative.
Banks led gains
Shares of Carrefour rose after the company reported forecast-beating third quarter sales.
Analysts at Deutsche Bank downgraded their view on shares of Siemens to hold from buy.
The best performing sectors within the DJ Stoxx 600 were: Banks (1.95%), personal and Household goods (1.77%) and Automobiles (1.55%).
Inflation drops back unexpectedly
Germany’s consumer price index (CPI) for the month of September has fallen slightly, to 2.0% year-on-year, after a reading of 2.1% for the month before.
France’s CPI for the same month dropped at a 0.3% month-on-month pace, well below the unchanged reading expected by most economists.
Likewise, Spain’s CPI has nudged lower, to 3.4% year-on-year, after a reading of 3.5% for the previous month.
German wholesale prices increased at a 2% year-on-year clip in September, the same as expected and as last month’s reading.
Slight rise in the single currency
The euro/dollar is now up 0.68% to the 1.2939 dollar mark.
Front month Brent crude futures are now rising by 1.158 dollars to the 115.67 dollar mark on the ICE.