Europe close: equities fall on Greek debt woes
European equities declined as data showed Greece’s economy shrank as the nation’s government continues to tackle a deal on its debt with creditors.
Greek gross domestic product (GDP) fell 2% compared with the last quarter, confirming a preliminary estimate released earlier this month. The latest contraction follows a 0.4% decline in the fourth quarter of 2014.
The report came as EU policymakers warned that a deal to unlock further aid to Greece was yet to be made during the G-7 on Friday.
“The red line is that there cannot be a deterioration of the overall budget situation, and in fact there needs to be an improvement,” French Finance Minister Michel Sapin said in an interview with Bloomberg at the G-7. Bailout talks “are progressing faster but not yet fast enough to conclude.”
Yanis Varoufakis said the country was looking for a comprehensive agreement with its international creditors that should include debt relief.
During an interview with Greek radio station Vima FM, he said the country was very close to completing a Greek programme review, and that the talks with its creditors had shown progress.
Meanwhile, European Union Economy Commissioner Pierre Moscovici said in an interview with CNCB that talks between Greece and its lenders had seen “good progress”, although he added that further measures, such as pensions, needed to be discussed.
“European equity markets are rattled as discussions over Greece’s finances rumble on,” said David Madden, market analyst at IG. “It’s the last trading day before the end of May deadline for Greece, and traders are not takings any chances. Until we have some clarity about a deal being struck, dealers will always fear for the worst.”
A spokesman for Greece said on Thursday that the government intends to reach a deal on cash-for-reforms by Sunday, while International Monetary Fund director Christine Lagarde said that Greece could leave the euro if a deal isn’t reached.
With the focus still firmly on Greece, better-than-expected data out of Germany failed to provide a boost to markets.
Figures from the Federal Statistics Office showed that retail sales rose by 1.7% on the month in April, beating analysts’ expectations for a 0.8% increase. On a year-on-year basis, sales were up 1%.
Stateside, GDP fell at an annualised pace 0.7% in the in the first three months of 2015, worse than a preliminary estimate of an increase of 0.2% but ahead of economists' forecasts for a contraction of 1%.
The Chicago Business Barometer shrank to 46.2 in May from 52.3 in the prior month. A level below 50 indicates that the economy shrank for the region.
US personal consumption rose 1.8% in the first quarter, less than the 2% forecast and following a 1.9% increase previously.
The University of Michigan’s index on consumer confidence rose to 90.7 in May from 95.9 in April. Analysts had expected a final May reading of 89.5, compared with a preliminary report of 88.6.
Company-wise Syngenta rose following reports that it was building up defenses for a possible higher bid from Monsanto.
Vivendi was also on front foot, nudging up after the company said it would book a €4.2bn pre-tax gain from the sale of Brazilian company GVT.
Astrazeneca was in the red, despite announcing plans to collaborate with Lilly on immuno-oncology combination clinical trials on solid tumours.
Sector-wise, precious metal miners Fresnillo and Randgold Resources were trading higher, alongside insurers Prudential and Admiral Group.