European Markets Dropped After Greece Delayed Loan Repayment

(RTTNews) - The European markets finished solidly in the red Friday, after Greece has decided to delay the crucial loan repayment to the International Monetary Fund that had been due today. However, the markets recovered some ground in the afternoon, following the release of the stronger than expected U.S. employment report for May.

Greece asked IMF on Thursday to bundle the four payments due to the lender this month, totaling 1.6 billion euros, into a single payment to be made on June 30. It was the first time during the five-year long crisis that the country delayed a payment to the IMF.

The surprise announcement from Greece came just hours after IMF Managing Director Christine Lagarde expressed confidence that the government would honor the payment due on Friday. However, German Chancellor Angela Merkel said that the talks were nowhere near a conclusion.

Earlier this week, Greek officials said that the country could pay the 300 million euros due on Friday, while hinting that the government may opt not to make the payment if there was no sign of a deal by then.

A defiant Tsipras reportedly rejected some of the "extreme proposals" in the five-page proposal that creditors' offered Greece. He is set to speak in the Greek parliament later on Friday to give details of his meeting with EU leaders earlier this week.

Employment in the U.S. increased by much more than anticipated in the month of May, according to a report released by the Labor Department on Friday. The report said non-farm payroll employment jumped by 280,000 jobs in May compared to economist estimates for an increase of about 225,000 jobs.

While the increase in employment in April was downwardly revised to 221,000 jobs from 223,000 jobs, the employment growth in March was upwardly revised to 119,000 jobs from 85,000 jobs.

However, the report also showed that the unemployment rate inched up to 5.5 percent in May from a nearly seven-year low of 5.4 percent in April. The increase came as a surprise to economists, who had expected the unemployment rate to remain unchanged, but the uptick primarily reflected an increase in the size of the labor force.

Germany's central bank raised its economic growth outlook as the economy returned to a growth path with strength stemming from domestic demand that was boosted by favorable labor situation and substantial income increases.

In the semi-annual report released Friday, Bundesbank economists forecast real gross domestic product to grow 1.7 percent this year, faster than the prior estimate of 1 percent. For next year, growth is expected to be 1.8 percent instead of 1.6 percent.

The British Chambers of Commerce downgraded its U.K. growth projection for this year citing weaker than expected expansion in the first quarter. The business lobby expects the economy to expand 2.3 percent this year instead of 2.7 percent. Nonetheless, the slowdown is expected to be temporary.

Britons' inflation expectations for the year ahead improved from a more than 13-year low level, results of a quarterly survey from the Bank of England showed Friday. The inflation rate is expected to reach 2.2 percent over the coming year compared with 1.9 percent estimated in February, the lowest since November 2001.

The Euro Stoxx 50 index of eurozone bluechip stocks decreased by 1.21 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.66 percent.

The DAX of Germany dropped by 1.26 percent and the CAC 40 of France fell by 1.33 percent. The FTSE of the U.K. declined by 0.80 percent and the SMI of Switzerland finished lower by 1.39 percent.

In Frankfurt, Commerzbank dropped by 2.05 percent and Deutsche Bank weakened by 1.67 percent.

Fresenius fell by 1.70 percent and Fresenius Medical Care lost 1.47 percent. Bayer also closed lower by 1.86 percent.

Volkswagen decreased by 1.65 percent. Daimler weakened by 1.21 percent and BMW surrendered 0.67 percent.

In Paris, Credit Agricole declined by 1.90 percent. Societe Generale finished down by 1.67 percent and BNP Paribas lost 1.85 percent.

In London, Vodafone dropped by 2.44 percent. The company confirmed that it is involved in asset swap talks with Liberty Global, not merger talks.

Tesco decreased by 1.37 percent. The supermarket chain is reportedly considering a sale of its South Korean business. WM Morrison Supermarkets also fell by percent.

British American Tobacco declined by 2.27 percent and Imperial Tobacco surrendered 2.57 percent.

Nestle fell by 1.54 percent in Zurich. The Food Safety and Standards Authority of India ordered recall of nine variants of its Maggi noodles from the Indian market, on safety concerns.

Germany's factory order growth exceeded expectations in April helped by foreign demand, data from Destatis revealed Friday. Factory orders increased 1.4 percent month-on-month, faster than March's 1.1 percent growth and a 0.5 percent rise forecast by economists. It was also the fastest growth since December, when it rose 3.3 percent.

France' foreign trade deficit decreased more-than-expected in April, as exports rose and imports fell, figures from the Customs Office showed Friday. The trade deficit declined to EUR 3.0 billion in April from EUR 4.4 billion in the previous month. Economists had expected a shortfall of EUR 3.95 billion.