European Markets Dropped On Greek Uncertainty

(RTTNews) - The majority of the European markets finished in negative territory Thursday. Investor sentiment took a hit from uncertainty regarding the situation in Greece. The country urgently needs to strike a deal with its creditors to unlock the next tranche of funds.

There have been conflicting reports on the state of talks between Athens and its international creditors. Greek Prime Minister Alexi Tsipras said Wednesday that his government is close to reaching a deal with its European and International Monetary Fund lenders.

Meanwhile, European Commission Vice President Valdis Dombrovskis said the two sides still have a ways to go.

The European Central Bank Governing Council member Ewald Nowotny said Thursday the ECB would not break rules to provide any short-term financing for Greece, damping speculation that the bank may loosen its stance on the cash-strapped country.

"We do not have flexibility to do, let's say, some financing outside our rules," Nowotny, who heads the Austrian central bank, said in an interview to the broadcaster CNBC.

The outcome of a meeting of G7 finance ministers in Dresden today and tomorrow could shed more light on how Greece's international creditors seek to end the impasse.

Further delay in reaching an agreement between Greece and its creditors could raise the yields on debt of other countries even though the sovereign-banking sector feedback mechanisms are less likely to cause much damage this time, the European Central Bank said in a report on Thursday.

"Sovereign risks emanating from Greece, in particular, have increased sharply owing to heightened political uncertainty over the past six months, while the banking sector in Greece has witnessed substantial deposit outflows, a loss of access to the wholesale funding market and deteriorating asset quality," the ECB said in its bi-annual Financial Stability Review.

"Financial market reactions to the developments in Greece have been muted to date, but in the absence of a quick agreement on structural implementation needs, the risk of an upward adjustment of the risk premia demanded on vulnerable euro area sovereigns could materialize."

Speaking on the sidelines of the release of the report, ECB Vice President Vitor Constancio stressed that there was no 'automatic' connection between a default of the Greek government and the solvency of Greek banks.

Constancio maintained that Greece will not leave euro even if it default on its debt repayments.

The Euro Stoxx 50 index of eurozone bluechip stocks decreased by 0.95 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.55 percent.

The DAX of Germany declined by 0.79 percent and the CAC 40 of France fell by 0.86 percent. The FTSE of the U.K. gained 0.11 percent, but the SMI of Switzerland finished lower by 0.02 percent.

In Frankfurt, Daimler decreased by 1.83 percent and BMW fell by 1.76 percent. Volkswagen also finished lower by 1.11 percent.

Deutsche Post dropped by 3.81 percent and Bayer fell by 2.56 percent. Insurer Allianz lost 2.33 percent.

Bucking the trend, Infineon Technologies climbed by 3.22 percent and Fresenius Medical Care added 2.05 percent.

Wireless communication services provider Drillisch climbed by 2.56 percent after Citigroup raised the stock to "Buy" from "Neutral."

In Paris, Credit Agricole decreased by 2.76 percent and Societe Generale lost 1.47 percent.

Car parts maker Valeo fell by 3.94 percent and tire manufacturer Michelin declined by 2.45 percent.

Renault weakened by 1.95 percent and Peugeot lost 1.16 percent.

Technip declined by 1.51 percent and Total finished lower by 1.00 percent.

In London, Sports Direct International jumped by 4.18 percent, after updating its full-year outlook.

Kingfisher, which issued its first-quarter trading update, rose by 2.24 percent.

Ericsson added 3.30 percent in Stockholm. The stock was raised to "Buy" from "Neutral" at Citigroup.

Assicurazioni Generali fell by 1.43 percent in Milan, despite a positive recommendation from DZ Bank.

Eurozone economic confidence remained unchanged at its second highest level in nearly four years in May despite the ongoing Greek crisis, survey results from the European Commission showed Thursday. The economic sentiment index held steady at 103.8 in May, while it was forecast to fall to 103.5. This was the second highest score since July 2011. The April figure was revised up from 103.7.

Germany's import prices continued to fall in April but at a slower than expected pace, data from Destatis revealed Thursday. Import prices fell 0.6 percent year-on-year in April, slower than the expected decrease of 0.7 percent and 1.4 percent decline seen in March.

Spain's economic growth accelerated as estimated in the first quarter, the statistical office INE said Thursday. Gross domestic product grew 0.9 percent quarter-on-quarter, faster than the 0.7 percent expansion seen in the fourth quarter. The sequential growth matched the preliminary estimate published on April 30.

Spain's retail sales growth accelerated unexpectedly in April, figures from the statistical office INE showed Thursday. Retail sales climbed a seasonally and calendar-adjusted 4.0 percent year-over-year in April, faster than March's 3.2 percent hike. Economists had expected the growth to ease to 2.6 percent.

Italy's consumer confidence weakened for the second straight month in May, and business sentiment also fell, defying economists' expectations for further improvement, survey figures from ISTAT showed Thursday.

The consumer confidence index dropped to a four-month low of 105.7 from April's revised 108.0. Economists had expected the index to fall to 107.9 from April's original 108.2 score. March's confidence reading of 110.6 was the highest since May 2002.

The business sentiment index in manufacturing fell to a three-month low of 103.5 from 104.0 in the preceding month, revised from 104.1. Economists had expected the index to rise for a ninth straight month to 104.5.

The U.K. economy grew at a slower pace as initially estimated in the first quarter, second estimates published by the Office for National Statistics showed Thursday. Gross domestic product expanded 0.3 percent in the first quarter, which was weaker than the 0.6 percent seen a quarter ago. This was the slowest growth since the fourth quarter of 2012.

After reporting a modest increase in first-time claims for U.S. unemployment benefits in the previous week, the Labor Department released a report on Thursday showing another uptick in initial jobless claims in the week ended May 23rd.

The report said initial jobless claims edged up to 282,000, an increase of 7,000 from the previous week's revised level of 275,000. The continued increase came as a surprise to economists, who had expected jobless claims to dip to 270,000 from the 274,000 originally reported for the previous week.

Pending home sales in the U.S. increased by much more than expected in the month of April, according to a report released by the National Association of Realtors on Thursday, with pending sales jumping to their highest level in nearly nine years.

NAR said its pending home sales index surged up 3.4 percent to 112.4 in April from a slightly upwardly revised 108.7 in March. Economists had expected the index to increase by about 0.8 percent.