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Friday, April 12, 2013

European Markets Hit by Cyprus Confusion

"Science Friday" Recommendations
"Science Friday" Recommendations (Photo credit: LollyKnit)

By The Wall Street Journal

London, Apr.12, stock market trading .- Confusion over the state of Cyprus’s financial bailout led to sharp moves in European markets on Friday, wiping out the positive reaction to better-than-expected euro-zone industrial production figures.
Cypriot officials confirmed that they were looking for extra assistance in the form of technical and structural aids and not an increase in bailout loans.
There had been speculation earlier on Friday that Cyprus would ask for further financial aid at Friday’s Eurogroup meeting in Dublin, which caused the euro to slump against the dollar and stocks to slide. Although the euro recovered a touch once Cyprus clarified its position, other financial markets still looked subdued toward the midway point of the European session.
Earlier on Friday, euro-zone industrial production data for February beat expectations. The initial reaction to the data was positive but confusion over Cyprus soon canceled this out. In addition, there were still concerns that the euro zone’s economy remains in the doldrums.
“While euro-zone industrial production rose 0.4% in February, output still looks likely to have contracted modestly overall in the first quarter of 2013, thereby contributing to a further drop in euro-zone gross domestic product,” said Howard Archer, chief U.K. and European economist at IHS Global Insight.
Investors will wait for further comments following the meeting in Dublin, which could give markets direction. Following statements from various officials late yesterday, Portugal and Ireland are now expected to receive a maturity extension in their bailout loans. This “should ease some worries in the short term after recent difficulties in the former country on the fiscal front,” said Crédit Agricole Corporate & Investment Bank.
In Asia, Japanese stocks closed with small losses but ended the week 5.1% higher as the dollar continued to hover below ¥100. The Nikkei has surged this week as the value of the yen has plunged in the wake of the Bank of Japan’s easing plans.
Mergers and acquisition news was prominent on Friday. Dutch coffee company D.E. Master Blenders NV was down just a touch after a group led by Joh. A. Benckiser GmbH said it would make a cash offer of €12.50 a share for the company, valuing it at around €7.5 billion ($9.82 billion).
Telecom Italia SpA shares surged as analysts continued to speculate over whether a merger deal with the Italian mobile business of Hutchison Whampoa Ltd. would go ahead. On Thursday, the board of Telecom Italia gave the go-ahead for talks to proceed.
U.S. stocks futures were lower, with Wall Street to take its lead from Europe. In addition, U.S. equities will likely take a breather after the Dow Jones Industrial Average hit a fresh record high in the previous session. Ahead of the opening bell in the U.S., investors will be keeping an eye out for quarterly results from J.P. Morgan Chase & Co. and Wells Fargo & Co.
U.S. retail sales, producer prices, business inventories and the University of Michigan measure of consumer confidence are also on Friday’s economic calendar.
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