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Market Update

European Markets Stall, UK Inflation Slows

Author: Nigel Thomas
Last Update: 10:02 AM ET May 21 2013

3:00 PM Frankfurt – European markets stalled after a 3-week global markets rally. The pound declined after the UK inflation declined and home prices in London led the rise across the nation. Greek bonds rallied as the yield curve returns to normal pattern.

European market diverged after the FTSE 100 index in London increased 0.1% and market indexes in Paris and Frankfurt declined 0.15%.

Market indexes in Amsterdam, Dublin and Lisbon fell more than 0.2% and in Madrid declined 0.7%.

Market indexes in Greece dropped 4% after National Bank of Greece plunged 24% after it announced stock sale plan that will dilute current shareholders.

Consumer prices increased 2.4% in April from a year ago in the U.K., according to the data released today by Office for National Statistics. The inflation data was lowered to 2.8% in March.

In a separate report the ONS said home prices increase accelerated in March to 2.7% from 1.9% in February. In London, home prices registered the largest gain in the nation with a rise of 7.6%.

The U.K. pound declined to a six-week low after the government reported lower than expected inflation data and ahead of the Bank of England minutes of meeting scheduled to release tomorrow.

The pound edged lower 0.6% to $1.5135.

A rally in Greek bonds continued as 10-year bond yield fell below the longer term bonds as the yield curve normalizes.

The 15 percentage point premium on 10-year bonds to 30-year bond has steadily faded in the last three months and dropped below the longer term bonds for the first time today.

Political stalemate in Bulgaria continued after the inconclusive elections on May 12.

Former Prime Minister Boiko Borisov said he will not support the attempt by the second largest party in the election results to form its attempt to form a government. Socialists and their ethnic Turkish MRF are short of one seat short of majority in 240-seat assembly.

GERB party controlled by Borisov holds the largest number of seats in the newly elected parliament but is short of majority to form a government.

Stocks in Review

Burberry Group Plc increased 3% after the largest luxury-products maker reported adjusted pre-tax profit increased 14% to 427.8 million pounds in the year to March. The luxury retailer increased annual dividend 16% to 29 pence a share.

Marks & Spencer increased to a 5-year high after the retailer said it plans to cut capital spending to boost profit margins.

Royal Mail Group Ltd said its full-year operating profit ending in March was 403 million pounds compared to 152 million pounds a year ago. The U.K. government is looking to sell the postal service.

Sonova Holding AG declined 1.5% after the Switzerland based world’s largest hearing aide maker lowered profit growth outlook.

Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc