4:25 PM Frankfurt – European markets turned higher after successful bond auctions from Greece, Spain, Italy and Belgium and German bund futures reversed earlier losses to turn positive. German economic sentiment improved in February but Greek economy shrank at annual rate of 7% in the final quarter of 2011.
European markets traded higher and reversed early trading decline on stronger than expected bond auction from Italy and Spain and German economic sentiment improved in January. Sovereign yields across the region were on the decline.
Indexes in the region declined after Moody’s lowered it credit view on Italy, Spain, Portugal, Slovenia, Slovakia and Malta. The credit opinion firm also said that France and UK could lose its highest rating as governments face pressure on rising expenses.
Italy completed the sale of €6 billion of bonds maturing in November 2014 and yields on bonds declined to the lowest since the last auction in March 2011. With the latest auction, Italy completed €34.5 billion of €90 billion debt roll over it needs to complete before the end of April.
The benchmark 10-year German bund yield declined 20 ticks to 1.38%.
Italian 2014 bonds yielded 3.41% compared to the previous auction of 4.83% in January and Spain sold €5.4 billion short term bonds with 12-month bills at a yield of 1.9% and 18-month bills. Despite the downgrade from Moody’s, Spanish bond auction attracted twice the supply.
Italian bond auction had a bid-to-cover ratio increased to 1.4 from 1.2 at the previous auction a month ago.
Greece sold €1.3 billion of 3-month bill at an average yield of 4.6%, unchanged from a year ago and Belgium sold 3.2 billion of 3-month and 12-month debt that yielded 0.89%.
Greek statistical agency said Greece’s economy shrank 7% in the final quarter of 2011 after falling at 5% in the third quarter. For the entire 2011, the economy declined 6.8%. According to the agency on the current prices, Greek GDP declined to €215 billion.
In London, FTSE 100 index traded lower 0.2% or 12.70 to 5,893, in Frankfurt DAX 30 index increased 0.4 to 6,739 and in Paris CAC 40 index declined 3.8 to 3,381.
Bank of France noted on its Web site that it loans €218.2 billion in December, higher than €166.6 billion in November. The record monthly loans to banking sector surpassed the previous high of €215.3 billion in December 2008.
In December, the European Central Bank lent €489 billion to the banking sector in a 3-year loans that lowered stress in the debt markets across the euro zone. Another round of loans of 3-year maturity is scheduled to be made available on February 29.
German investor confidence in February increased to a 10-month high to 5.4 from -21.6 in January.
Deutsche Boerse AG rose 2.3% to €49.90 after the operator of stocks and derivatives markets proposed a special dividend of €1 in addition to regular payment of €2.30 a share. Operating earnings in the fourth quarter increased to €228 million from a loss of €219 million a year ago.
Rio Tinto plc declined 3.1% to 3,726 pence and BHP Billiton plc dropped 0.9% to 2,064 pence after the two operator controlled joint venture approved the copper mine expansion in Chile that will cost $4.5 billion.
ThyessenKrupp AG declined 4% to €21.05 after the Germany based steelmaker reported a loss of €33 million compared to net profit of €261 million a year ago.
L’Oreal increased 3.6% to €84.59 after the company said operating earnings in 2011 increased 7.7% to €3.29 billion and reiterated outlook for 2012. Emerging markets recorded 10.6% growth in sales and Asia Pacific sales increased 13%.
The company also said that L’Oreal heiress Lilliane Bettencourt, 89, resigned from the company board and replaced by her 25-year old grandson. Bettencourt controls 30% stake in the company valued at €49 billion.
Nokia gained more than 2% to €3.81 after the chief executive of Nokia Siemens Networks in an interview raised the prospect of a public offering for the venture.