European Markets Edge Higher

Market activity was subdued, with Wall Street closed in observance of Martin Luther King’s Birthday. The Euro Stoxx 50 index, a barometer of euro zone blue chips, closed up 1 percent, and the FTSE 100 index in London rose 0.4 percent. The DAX index in Germany rose 1.25 percent. Indexes rose in France and Italy and were little changed in Spain. The euro held steady against the dollar.

As for the S. P. ratings cut last week, the agency cited a deteriorating economic situation and disappointment with leaders’ efforts to address the euro crisis. On Monday, S. P. also lowered by one notch its rating on the euro zone’s main bailout vehicle, to AA+ from AAA, in a widely anticipated move.

President Nicolas Sarkozy of France, in his first public comments since S. P. cut the country’s rating, said Monday that “in the final analysis, this doesn’t change anything.”

Speaking in Madrid at a news conference with the Spanish prime minister, Mariano Rajoy, Mr. Sarkozy said France and the other European countries that were downgraded “must cut our deficits, cut spending and improve the competitiveness of our economies to return to growth.”

Mr. Rajoy, who broke a pre-election promise by raising taxes, told journalists that he did not think additional tax increases would be necessary. He also said Spain should continue to hold a seat on the board of the European Central Bank.

Herman Van Rompuy, the president of the European Council, met Monday in Rome with Prime Minister Mario Monti of Italy. “Market players or rating agencies sometimes consider our response as incomplete or insufficient,” Mr. Van Rompuy said after the meeting, according to Bloomberg News. “Yet real progress has been made in reshaping the euro area in order to build on its fundamentals, which are on average sound.”

In its first test of investors’ appetite since the downgrade, France sold 8.6 billion euros, or $10.9 billion, of short-term debt securities on Monday at yields slightly lower than in the previous auction. The yields on the country’s 10-year bonds fell 0.04 percentage point by late Monday, to 3.014 percent.

Yields on Italian 10-year bonds edged down one basis point, to 6.581 percent, while Spanish 10-years were yielding 5.117 percent, down four basis points. A basis point is one-hundredth of a percentage point.

Reuters cited unidentified traders as saying the European Central Bank had intervened in the secondary bond market again, buying Italian and Spanish securities to relieve some pressure on yields.

Yields on German 10-year bonds, the European benchmark, were unchanged, at 1.764 percent.

The dollar was mixed against other major currencies. The euro slipped to $1.2667 by late Monday in New York from $1.2680 late Friday in New York, while the pound rose to $1.5325 from $1.5317.

Asian shares fell. The Tokyo benchmark Nikkei 225 stock average slid 1.4 percent. The Sydney benchmark index fell 1.2 percent. In Hong Kong, the Hang Seng fell 1 percent and in Shanghai the composite index declined 1.7 percent.

Article source: http://www.nytimes.com/2012/01/17/business/global/daily-stock-market-activity.html?partner=rss&emc=rss