Boost in German business sentiment fails to halt stock market declines

BETTER-than-expected business sentiment data from Germany failed to halt falls on international stock markets yesterday but helped slow their declines.

Germany’s underwhelming bond auction on Wednesday had raised fears that the eurozone debt crisis was spreading to the region’s largest economy, but concerns were eased yesterday with a report showing an unexpected rise in business confidence in the country, for the first time since June.

However, a reiteration from German chancellor Angela Merkel about not wanting to change the role of the European Central Bank (ECB) to help ease the debt crisis failed to win over investors.

The upturn in business confidence within Germany led one local economist to suggest, regarding Europe’s leading economy, that “although downside risks certainly remain, doomsday is not around the corner. A recession — and especially a deep and nasty one — is not in the pipeline.”

Meanwhile, the Bloomberg news service quoted Steven Major — global head of fixed-income research at HSBC Holdings — as saying that the sovereign debt contagion risk is now spreading into Germany.

Germany’s main stock index, the Frankfurt-based DAX, still slipped by just over half a percent yesterday, down 30 points, to just over 5,428 points.

Elsewhere, there were marginal declines with London’s FTSE-100 index down 0.24%, the CAC-40 in Paris down by 0.01% and the IBEX in Madrid slipping by 0.23%.

In Portugal, following the country’s slight downgrade by credit rating agency, Fitch, the PSI General Index was down by 0.65%, while the leading PSI 20 Index slipped by 0.85%.

Meanwhile, in Dublin, the ISEQ was back up, but only marginally so (by 89 points to 2,513 points), with significant falls for the likes of Dragon Oil, DCC, Elan, Paddy Power, Tullow Oil and Glanbia nullifying the overall effects of gains for Donegal Creameries, ICON, Kerry Group, Kingspan and CRH.

The US markets were closed yesterday for the Thanksgiving holiday, ahead of just a half day’s trading today, while there were mixed fortunes for the big Asian exchanges; the Hang Seng in Hong Kong up by 0.4%, but Tokyo’s Nikkei Index down by nearly 2%.