European Stock Markets Fight Against Deficits

European Stock Markets Fight Against Deficits

European stock markets are feeling losses from the recently concluded business week, in response to suggestions made by European Central Bank President Jean-Claude Trichet that an increase in interest rates may be coming shortly. The poor performance of stocks in the Eurozone also had the political turmoil in Middle East and Africa to blame, which was too strong for the news of an increase in the US employment rates to make improvements, which usually serve as a market stimulator.

The decreases in performance was primarily due to the banking and automobile sector. United Business Media Ltd. (UBM) also went down as a result of margin-shrinking. Inability to meet its profit projections caused a massive decrease in the value of Verbund AG (VER). Morgan Stanley and Citigroup Inc. deminishing their ratings, which was followed by a 9.2% decline for Carrefour SA (CA). However, Arkema SA (AKE) reported solid numbers which helped keep chemical shares up.

The benchmark Stoxx Europe 600 Index decreased by 0.8% to finish the week at 281.9 points. The index, which had one of its toughest weeks of the last eight months last month, has showed an overall improvement of 2.2% in 2011, because of higher than expected corporate revenues and emergence of signs that the international financial crisis is improving.

Louis de Fels, a Parisian money manager noticed that Trichet's words initiated the sharp increase in the value of euro against the dollar, which was positive news for the US, but bad for European markets. Saying also that European markets are reacting more to the political issues of Africa and the Middle East, than US counterparts. Fels further noted that the improvement in the US employment levels was a good sign, they could easily be counterbalanced by US government spending through QE2.

Earlier in the week, Trichet revealed that in order to battle the high inflationary pressures, interest rates could be increased. However, he said that any such move might be an one-off thing.

Credit Suisse Group AG's noted that the interest rates hikes could potentially influence the delicate economic situation of Europe in a negative manner. Following Trichet's March 3 disclosure, the euro achieved a four-month high against both the Japanese yen and the US dollar.

Libya's political unrest sparked fresh concerns that the turmoil could spread to other Oil-rich countries, resulting in a 29-month high for Crude prices in New York.

The latest figures released by the US labor department revealed that 192,000 new employees were hired by the US companies last month, in the midst of a recovering economy, which means that the unemployment level fell down by 8.9% to be at its lowest since April 2009.

Twelve out of 18 Western European markets slipping down, including France's CAC 40 Index, which retreated by 1.2%. Germany's DAX Index and the U.K.'s FTSE 100 Index both fell down by 0.2%.

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