European Markets Declined Despite Positive Economic Data

(RTTNews) - The majority of the European markets ended Tuesday's session in negative territory. The markets fell despite the better than expected Italian GDP report and British industrial production data. German manufacturing orders also increased faster-than-expected. Corporate earnings were mixed Tuesday and there were broker downgrades on several large companies.

Investor concerns over potential Fed tapering had a negative impact on the markets Tuesday. Dallas Federal Reserve Bank President Richard Fisher said the Fed should start paring its bond-buying program next month, if there is no intervening reversal in economic momentum in the coming weeks.

The European Central Bank stands ready to reduce interest rates further if inflation outlook warrants, ECB Executive Board Member Peter Praet said in a paper published on Tuesday.

"Against the conditions that we see prevailing over a meaningful horizon, our guidance includes an easing bias," Praet said in a paper published on the policy portal VoxEU.org, set up by the Centre for Economic Policy Research.

"This conveys the notion that we have not reached the lower bound on our key interest rates."

France should slow the pace of fiscal consolidation and cut down spending rather than increase taxes to support a nascent recovery, the International Monetary Fund said in an annual assessment of the economy.

The Washington-based lender predicts the economy will contract 0.2 percent in 2013 and grow 0.8 percent in 2014 and 1.5 percent in 2015.

"Weak conditions in Europe, low confidence and sizeable efforts to reduce the government deficit over the past two years have dampened growth," the lender said in the report. The economy flat lined in 2012 amid fiscal consolidation and domestic policy uncertainty.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.71 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.35 percent.

The DAX of Germany dropped by 1.21 percent and the CAC 40 of France fell by 0.43 percent. The FTSE 100 of the U.K. decreased by 0.29 percent, but the SMI of Switzerland gained 0.27 percent.

In Frankfurt, Deutsche Post decreased by 0.02 percent. The courier giant raised its full year outlook after profit surged in the second quarter.

Sky Deutschland surged by 6.38 percent, after its quarterly profit increased.

Munich Re dropped by 5.73 percent. The company's second-quarter profit declined, hit by claims stemming from natural catastrophes, especially the flooding in Germany and neighboring states.

Lanxess fell by 4.69 percent. The specialty chemicals firm reported a sharp decline in its second-quarter profit, hurt by lower selling prices. The company sees a challenging 2013, and believes its fiscal 2014 adjusted EBITDA target is no longer realistic.

Merck KgaA, which reported second-quarter results, lost 2.22 percent.

Salzgitter plunged by 12.35 percent, after the steel firm cut its full year outlook. JPMorgan also downgraded the stock to ''Neutral'' from ''Overweight.''

Aareal Bank declined by 4.04 percent, after HSBC reduced its rating on the stock.

In Paris, Credit Agricole fell by 0.88 percent. The lender reported a sharp increase in second-quarter profit, as most of the growth came from elimination of operating losses for Greece.

Citi added Air France to its ''Key Buy List.'' The stock finished down by 2.03 percent.

In London, Legal & General increased by 2.48 percent. The company's first-half profit increased and it boosted its dividend.

Fresnillo sank by 11.04 percent, after its half year profit declined.

Standard Chartered gained 2.95 percent, after announcing first-half results.

HSBC fell by 0.94 percent, after Deutsche Bank downgraded it to "Hold" from "Buy."

GlaxoSmithKline decreased by 0.79 percent, after Citigroup downgraded it to "Neutral" from "Buy."

Unilever lost 0.74 percent, after JP Morgan downgraded it to "Neutral" from "Overweight."

Germany's manufacturing orders recovered in June at a faster-than-expected rate, which was the biggest in eight months, driven by strong demand for big-ticket items, largely from the Paris air show. The outcome underpins hopes that economic activity is strengthening, and benefits of the ongoing recovery in the euro area is feeding into Europe's largest economy.

New orders placed with German manufacturers rose a seasonally adjusted 3.8 percent monthly, reversing May's revised 0.5 percent decrease, preliminary estimates from the Federal Ministry of Economics and Technology showed Tuesday.

Germany's construction sector continued to expand at the start of the third quarter, but the pace of expansion eased in July from the previous month, survey results from Markit Economics showed Tuesday. Indicating a notable slowdown in the pace of growth, the construction Purchasing Managers' Index fell to 51.5 in July from 54.5 in June.

Italy's longest recession in the post- World War II era eased in the second quarter of 2013 with the gross domestic product declining at the slowest pace in nearly two years, preliminary data from statistical office Istat revealed Tuesday.

GDP fell 0.2 percent quarter-on-quarter in the June quarter after adjusting to seasonal and calendar variations. This came after a 0.6 percent contraction in the first quarter and was better than the expected 0.4 percent decline.

Britain's industrial production recovered at a faster-than-expected pace in June, helped by a rebound in manufacturing, the Office for National Statistics said Tuesday.

Industrial output rose 1.1 percent month-on-month in June, following three consecutive months of zero growth. The 1.1 percent increase was the fastest since July 2012, when it grew 3.1 percent. Economists had forecast output to grow by a moderate 0.7 percent.

Retail sales in the United Kingdom rose in July, according to survey results posted Tuesday by the British Retail consortium. BRC said same store retail sales were up 2.2 percent compared to one year earlier. The figure matched the forecasts of most economists.

U.K. house prices increased for the sixth consecutive month in July, Lloyds Banking Group's Halifax division showed Tuesday. House price inflation accelerated unexpectedly to 0.9 percent on a monthly basis from a revised 0.7 percent in June. Economists had forecast the growth rate to slow to 0.5 percent.

With the value of exports rising and the value of imports falling, the Commerce Department released a report on Tuesday showing that the U.S. trade deficit narrowed by much more than anticipated in the month of June.

The Commerce Department said the trade deficit narrowed to $34.2 billion in June from a revised $44.1 billion in May. Economists had expected the deficit to narrow to $43.0 billion from the $45.0 billion originally reported for the previous month.