European markets end week on a mixed note
A week when the UK’s leading share index hit its best level for 14 years failed to end on a high, writes Nick Fletcher. Worries about the Portuguese economy, despite its expected exit from its bailout programme this weekend, unsettled investors, while Thursday’s weaker than expected eurozone growth figures continued to have an influence. So by the close of play:
• The FTSE 100 finished 14.92 points or 0.22% higher at 6855.81
• Germany’s Dax dropped 0.28% to 9629.10
• France’s Cac closed up 0.26% at 4456.28
• Italy’s FTSE MIB jumped 1.12% to 20,648.59
• Spain’s Ibex ended 1.1% better at 10,478.7
On Wall Street, the Dow Jones Industrial Average is currently down 5.6% points or 0.04%.
On that note it’s time to close for the evening and indeed the week. Thanks for your comments, and we’ll be back next week.
Hold that Pfizer excitement.
Not a raised bid for AstraZeneca but a new drug application for breast cancer treatment palbociclib. Pfizer shares are back trading again.
Back to those fired cleaners in Greece who today saw their eight month struggle to be rehired end in victory following a Greek court’s landmark decision to have the reinstated. But while the victory is sweet the dismissed workers fear more anguish lies ahead if the Greek government decides to appeal the ruling. Helena Smith reports:
Seated around the long trestle table they erected ten days ago outside the offices of the ministry of finance on Karageorgis Servias, which runs of central Syntagma square, the cleaners were today in joyful mood.
The ruling, after eight months of persistent protests, is the vindication the nearly 500 laid off employees have long been waiting for.
“For us it is the biggest victory that could have happened,” says Despoina Kostopoulou, aged 53, who has been employed as a cleaner at the finance ministry for nearly 20 years. “It has finally shown that our struggle has been effective.”
But the women are also worried as to what the future will bring. In an ideal world they would be re-instated and re-hired next week following the court verdict. “Everything now depends on how the ministry reacts, “ said Kostopoulou. “We won’t be able to really enjoy our victory until we know that the government is not gong to appeal the decision and our lawyer says that is far from sure. If it doesn’t we will return to work on Monday and Tuesday. But if it does this could go on for many months yet,” continued the cleaner who has spent the past ten nights sleeping in a tent pitched outside the ministry
Unexpectedly organised, and often protesting with military precision, the cleaners have become the symbol of the corrosive effects of ruthless cost cutting during Greece’s debt crisis. “How much has the government really saved by firing us,” asked Kostopoulou. “We have been pushed to the brink of despair. Many of us are mothers with no qualifications or ability to be rehired elsewhere. The drama we have lived has been so unnecessary and so unfair.”
Pfizer shares halted pending news.
General Motors is paying a $35m fine over the faulty ignition switch has been linked to at last 13 deaths, the Department of Transport has just announced.
CEO Mary Barra was grilled on Capitol Hill over the switch problems in April, which also led to 2.6 million cars being recalled. Further hearings are expected.
And as Dominic Rushe explains here, the $35m fine is not the end of the issue:
General Motors struck a deal with the US Department of Transportation on Friday over its massive recall of cars with faulty ignition switches.
The news, first reported by CNBC, comes amid a Justice Department investigation into GM’s failure to address deadly safety problems in a timely manner.
Over in Athens, Helena Smith reports that the finance ministry cleaning staff are together, as usual, to digest the courtroom victory which means hundreds should get their jobs back (as covered at 11.19am)
Here’s a video clip of Tony Cocker, chief executive of E.ON, saying he is “personally devastated” about the company’s mis-selling scandal, which earned a £12m fine from Ofgem today.
Consumer confidence in the US has taken a knock. The University of Michigan’s monthly survey dropping to 81.8, from 84.1 in March.
That’s weaker than expected, with analysts forecasting a small rise to 85.0.
It continues the topsy-turvey theme of US data recently — just a little while after the encouraging jump in housing starts.
Over in Italy, Matteo Renzi’s cabinet have agreed to sell 40% the country’s postal service; part of its plan to raise €12bn through asset sales.
The government said the sale of a stake in Poste Italiane “can be carried out in several stages and through a public offering,”. It could raise around €4bn.
The cabinet meeting also approved the sale of Enav, the state air traffic control agency, which could bring around 1.0 billion euros into state coffers.
The government is also planning to list up to 49 percent of state-owned shipbuilder Fincantieri in the biggest privatisations in two decades as part of an effort to reduce Italy’s towering debt mountain.
Quick markets update – and trading around the globe remains lacklustre this afternoon as the week draws to a close.
Wall Street just opened, and the main indices inched very slightly higher after Thursday’s selloff.
- DOW JONES: UP 2.06 POINTS, OR 0.01 PERCENT, AT 16,448.87 AFTER MARKET OPEN
- S&P 500 0.11 POINTS, OR 0.01 PERCENT, AT 1,870.96 AFTER MARKET OPEN
- NASDAQ UP 0.38 POINTS, OR 0.01 PERCENT, AT 4,069.67 AFTER MARKET OPEN
The FTSE 100 is bobbing around the no-change mark (yawn). Supermarkets are leading the way, after encouraging sales figures from Asda yesterday.
Alastair McCaig of IG comments:
Yesterday’s Dow sell-off caused frazzled nerves and takes the shine off the ‘fresh all time highs’ narrative that predominated earlier this week.
The lack of volume on up days and the avalanche of selling on down days should be a major warning sign for investors. The continued volatility will mean that those sitting on the sidelines waiting for an entry will stay out even longer, perhaps waiting for a retest of the April lows.
Germany’s DAX has dipped 0.3% in Frankfurt, and the French CAC is flat.
America’s house-building sector roared back to life after a few quiet months, with the number of housing starts jumping 13.2% in April.
Housing starts (which count when a builder begins constructing a new site) rose to an annual pace of 1.07 million, the highest level since November 2013.
And permits to build a new homes jumped 8%, to an annual rate of 1.08 million, suggesting housebuilding will be strong for the coming months.
The number of multi-family properties (apartment blocks, or condominiums) surged by almost 40%, while new single-family homes rose just 0.8%.
Paul Hewitt, business development manager at corporate governance firm Manifest, has confirmed that Kentz is the first UK company to see its boardroom pay policies rejected this year.
“Until today we were talking about Hiscox being the biggest so far so Kentz is the first to be defeated this year”.
A significant victory for shareholder power, then. Yesterday, Hiscox suffered a 42% rebellion over its pay plans.
(via Jill Treanor)
Kentz isn’t the first UK-listed company to face the wrath of its investors in recent week, but I think it’s the first one to actually have its pay policy voted down (making it the first undeniably successful revolt of the year)
This morning, a quarter of shareholders in Chime refused to back its pay policies (led by Sir Martin Sorrell’s WPP).
And on Wednesday, ITV survived a protest over CEO Adam Crozier’s pay packet.
Pay revolt at Kentz Corporation
Engineering and construction firm Kentz Corporation has just been rocked by the first successful revolt over boardroom pay of the year.
Investors in Kentz have refused to approve the engineering and construction company’s remuneration policies, forcing it to revise the plans.
Over 37 million shares were cast against the (binding) vote on Kentz’ remuneration policies, with 35 million in favour. A further 10 million shares were withheld (the traditional way of expressing concern without actually voting against the board).
In a statement, Kentz said it “notes the position of our shareholders”, and will speak to them to adjust its pay plans
Once this consultation has concluded, we will put the revised Remuneration Policy forward for another vote in due course.
This is the first time that Kentz has allowed its shareholders to vote on pay – previously it used its status as a Jersey-based company as a loophole to avoid it.
According to the FT, Kentz CEO’s basic pay packet has risen by 60% since 2011, to $780,000.
Is the Shareholder Spring over excessive pay turning into a Summer of protests?
Portugal’s PM vows to continue reform agenda
Portugal’s prime minister has denied that the country will ease up on its austerity measures once it exits its bailout, this weekend.
Appearing on CNBC today, Pedro Passos Coelho acknowledged the suffering of the Portuguese people since 2011, but insisted there was no prospect of easing up on his tough reform programme.
Passos Coelho said Portugal had experienced:
Three years of tough measures, a lot of sacrifices from the Portuguese people, but at the end we have been able to reconstruct some trust on the financial markets, trust in the people, and finally we are in a sustainable path to come back to growth, to growth .
And having learned yesterday that the Portuguese economy shrank by 0.7% in the last quarter, Passos Coelho says Lisbon cannot change course, and will actually speed up
We will maintain the fiscal responsibility, the necessary support to maintain financial stability and we will boost the reform momentum because as you know for the past three years we had a reform agenda in structural change, very import and we must maintain to keep, to stick this momentum for the future.
As flagged up at 10.20am, analysts fear that the eurozone crisis could flare up again this year as government’s lose the will to implement unpopular reforms.
Passos Coelho, though, reckons Portugal can avoid reform fatigue, saying:
We have less budget deficit, public deficit than other partners in Europe for instance like Spain or Ireland for instance. We have better conditions now to pay attention to job creation and the tradable sector of the economy.
Hundreds of Greek cleaning staff who lost their jobs in the government’s austerity drive have won a “landmark” victory in the Athens courts, their lawyer said today.
The Athens Court of First Instance accepted an appeal filed by around 400 Finance Ministry cleaners, who had been placed in the “mobility scheme” from where employees were redeployed or laid off.
The cleaners have been a regular sight outside the finance ministry for months; on one occasion they famously forced Troika officials to flee down a fire escape.
Angry workers have staged a running protest outside the Finance Ministry’s headquarters on Nikis Street for months.
The Kathimerini newspaper has more details:
The court decision comes as the eight-month period of assessment, during which it is decided whether staff are transferred to another civil service post or dismissed, is set to expire.
Hundreds of employees in other parts of the broader civil service including the education and health sectors have also protested the mobility scheme, most with industrial action such as strikes rather than legal appeals.
Joao Monteiro, analyst at Valutrades, says traders are fearing that markets could be heading for a selloff:
It’s been a mixed end to the week for Asia equities as traders clearly remain unsettled by thoughts that a wider sell-off may be underway. The Nikkei fared worst after that downbeat US economic data added support to the Yen…
On the basis that Wall Street stabilised last night and there hasn’t been a catastrophic start to the day in Europe either, a full-blown correction may be avoided for now anyway, but it’s difficult not to see the storm clouds as gathering.
Carlos Da Silva, an analyst at IHS Automotive, argues that the market is still recovering — although it would be frankly alarming if sales weren’t higher than the dark days of 2012 and 2013.
Da Silva wrote:
“We must keep in mind that, in absolute terms, the level of sales is and should remain at a very low tide. There is still a long way to go before the E.U. turns into a healthy market.”
Analysts are warning that the industry won’t return to its precrisis levels before the end of the decade.
And the New York Times flags up that Europe is lagging the wider worldwide market:
BMW, the German luxury carmaker, reported on Tuesday that its January-April sales rose 7.5 percent from the same period in 2013, putting it on track for global sales this year of two million vehicles — the most ever. But its European sales were up just 2.4 percent in the same period, weighed down by the weak showing of its Mini brand.
On the subject of eurozone jitters (10.20am), Greek bonds continue to weaken today.
Some traders are still concerned about a government paper that proposed a capital gains tax on investors who held Greek bonds in 2012 and 2013.
Daniel Lenz, strategist at DZ Bank, said:
“There will be some investors that are concerned, and should take into consideration that is not just a one-day movement but something more prolonged.”
This has pushed up the interest rate on 10-year Greek debt to 6.92%, from 6.83% last night.
Could this month’s European elections trigger another phase of the euro crisis?
Jane Foley, currency strategist at Rabobank, argues that there’s been a clear “souring of sentiment” towards the euro area in recent days. with stock markets and bond prices both suffering.
Greece’s ASE is now down 3.36% in the year to date following a 12.25% retreat over the past 3 mths. Over the past 5 days, Spain’s IBEX has dropped 1.4% while Portugal’s PSI is down 4.8%.
Established parties in many countries are heading for a shoeing at the ballot box this month, given the depth of public anger over the events of recent years. That will fan fears that political instability could reignite the crisis, at a time when sustained economic growth is elusive.
Although the periphery has come a long way from the darkest darks of the economic crisis, opinion polls linked to this month’s European elections serve as a reminder that economic struggles are still playing out. Specifically, discontent over high levels of unemployment and changes to living standards remain at extremely high levels and both European institutions and domestic political are being blamed. A recent national Greek opinion poll suggest that the PM’s coalition partner Pasok has only 5.5% of a vote, with this party taking a lot of the blame for the crisis. If a general election were to be called now, this coalition would probably not survive. This suggests a rocky political landscape is still a potential threat in Greece. In Portugal too, opinion polls suggest that support for the ruling coalition has plunged and that anger stemming from the impact of the crisis is still extremely raw. In Spain too domestic political parties are also reportedly taking a lot of the blame for the continue impact of the crisis.
The nature of democracy means that politicians seek to be popular. The implication is that momentum towards structural reform in Europe could be lost as general elections near. This is turn could dull the attraction of peripheral assets. The crisis may yet come back to bite us.
No Sunday morning lie-in for me….
There’s an edgy mood in Europe’s financial markets today, with the main indices little changed after yesterday afternoon’s selloff.
Marc Ostwald of Monument Securities reckons that traders are experiencing “a bout of vertigo” after the recent rallies.
The news yesterday that the eurozone only grew by 0.2% last quarter continues to weigh on shares too.
Ian Williams of Peel Hunt says the data:
“underline the continued fragility of domestic demand, especially in nations where Government policy seems to be hindering progress”.
As witnessed in this morning’s car sales figures….
E.ON’s £12m fine for mis-selling energy products to hundreds of thousands of customers is the latest proof that the market is broken, claims the opposition Labour party which promises to overhaul the industry.
Jonathan Reynolds MP, Shadow Energy and Climate Change Minister, says:
E.ON is just the latest in a long line of energy companies to be found guilty of misleading the public. The energy giants must know that if they mistreat customers already facing a cost-of-living crisis there will be a very heavy price to pay.
In the UK, energy regulator Ofcom has torn into E.ON’s “extensive poor sales practices”, as it hits the company with a £12m fine for misselling.
And the final bill could hit £20m, once the company has paid around £35 compensation to 333,000 customers who were missold energy. Full story here.
Analysts are also concerned that the pick-up in cars sales this year is due to aggressive price-cutting, and a growing trend of selling demonstration models as “nearly new”, at a discount.
Reuters recently found that various incentives and discounts are cutting 12% off the price of a car – good for consumers, but eating into profit margins and also pushing down inflation.
That’s another reason to fret about the news that growth slowed to +4.6% in April, from March’s 10% jump.
Analysts will want to see whether heavy sales incentives and discounts — which have ripped a hole in carmaker profitability — are starting to come down before they pronounce the industry back on safe footing.
This morning’s car figures also show that mid-market brands, rathe than luxury models, are motoring off the forecourts.
Sales of Dacia, the Romanian carmaker now part of Renault, are up 34% year-on-year in April. And Skoda sales are up 22%.
In contrast, Mercedes-Benz registrations rose just 1.1% compared to April 2013, when Europe was in recession, while Audi sales were only 0.6% higher, and BMW were up 2.3%.
EU car sales growth hits five-month low
European car sales have risen at their slowest rate in five months, adding to concerns over the durability of the recovery.
Industry body ACEA reports this morning that new car registrations across the EU rose by 4.6%, year-on-year in April to 1,089,226. That’s the the third lowest figure for an April since 2003.
On the upside, this is the eighth month in a row when sales were higher than a year ago. And the late Easter this year probably won’t have helped.
But the concern is that the revival is tailing off, at levels that are still historically weak. Especially after yesterday’s disappointing GDP figures.
Car sales actually fell year-on-year in Germany, which doesn’t suggest domestic demand in Europe’s largest economy is going to drive the euro recovery strongly onwards.
Sales were down 3.6% in Germany, compared to April 2013. The Italian market was little changed, up 1.9%. But they rose 5.8% in France, +8.2% in the UK, and +28.7% in Spain — where a government scrappage scheme has been driving demand.
Gian Primo Quagliano, head of automotive-research company CSP in Bologna, Italy, says the data shows there’s no significant recovery in the industry – which employs hundreds of thousands of Europeans.
Quagliano told Bloomberg.
“We are not seeing a real recovery in the car market in Europe, just a modest rebound,”
“Europe needs economic measures to boost consumption and bring back customers into showrooms.”
Here’s their take: European Auto Sales Rise at Slowest Pace in Five Months
So far this year, EU car sales have grown by 7.4% – and again, Germany is lagging behind.
The increase in passenger car registrations in this period ranged from 2.9% in Germany, 3.7% in France, 5.0% in Italy to 12.5% in the UK and 16.2% in Spain.
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