LONDON (ShareCast) - Markets retreated again on Tuesday with the heavier losses to be seen in Spain and Italy, as fears escalated that the Eurozone is hurtling towards a break-up.

Ratings agency Moody´s decision to slash its rating on the outlook for the sovereign debt ratings of Germany, the Netherlands and Luxembourg put investors on the back foot. The outlook on Finland´s long-term debt rating, however, was reaffirmed at “stable.”

One of the main reasons for proceeding in the above manner, Moody´s explained, is the gradualist approach being taken by the Eurozone to the resolution of the periphery crisis. In Moody´s view, that entails larger potential risks for those economies which will bear the burden of providing aid, due to both the resulting larger contingent liabilities and the potential for losses on the same which a slower approach entails. Moody´s also warned of the risks inherent in allowing Greece to leave the single currency.

In that same vein, in an interview with the BBC, the President of Goldman Sachs Asset Management, Jim O´Neill, has called for the European Central Bank (ECB) to take radical actions to stem the crisis.

Adding to the tension in markets, Spain´s Treasury managed to sell €3.05bn in bills this morning, but at modestly higher interest rates on the six month paper.

Meanwhile, the BBC also had an interview with the finance minister for Catalonia, the north-eastern Spanish region, in which the minister said that the Spanish central government is not so much its lender of last resort as its lender of only resort. The comments raised the prospect that the region would be asking for a government hand-out soon, with other regions possibly in the queue behind it.

Peugeot wants government aid

French car maker Peugeot wants government aid on top of wage concessions as a condition for averting a second French auto plant closure, Reuters reported. The stock was the worst performing blue-chip in Paris.

European chipmaker STMicroelectronics was the next worst performer after it posted second-quarter revenue in line with expectations but warned that bookings softened in June.

Dutch telecommunications group KPN has slashed its 2012 dividend by more than half.

Irish drugs firm Elan took a tumble after reports emerged that an Alzheimer treatment in which it has a financial interest, failed to prove effective in a trial. The drug is being developed by US pharmaceuticals company Pfizer and health care colossus Johnson & Johnson.

Spanish banks were friendless as Spain's borrowing costs ratcheted higher.

Watchmaker Swatch ticked up after earnings came in ahead of expectations.

Weak manufacturing data

The Eurozone manufacturing sector purchasing managers´ index has come in at 44.1 for the month of July, versus 45.1 in the month before (Consensus: 45.3).

Some analysts are calling attention to the drop seen in domestic orders, which for them constitutes a further step towards a further deterioration in the crisis.

The Eurozone service sector purchasing managers´ index has come in at 47.6 for the month of July, versus 47.1 in the month before (Consensus: 47.3).


CAC 40 - Risers
Cap Gemini (CAP) € 26.68 +2.48%
EADS (EAD) € 28.44 +1.84%
Unibail-Rodamco (UL) € 149.55 +1.56%
Lafarge (LG) € 34.54 +1.32%
Accor (AC) € 24.58 +1.30%
Schneider Electric (SU) € 41.85 +0.86%
Alstom (ALO) € 24.99 +0.71%
Pernod Ricard (RI) € 84.92 +0.68%
Publicis Groupe Sa (PUB) € 39.10 +0.42%
LVMH (MC) € 119.00 +0.25%

CAC 40 - Fallers
Peugeot (UG) € 6.24 -4.07%
ST Microelectronics (STM) € 3.76 -3.73%
EDF (EDF) € 15.30 -3.50%
Credit Agricole (ACA) € 2.94 -3.23%
AXA (CS) € 8.90 -3.12%
France Telecom (FTE) € 10.23 -2.34%
Bouygues (EN) € 19.15 -2.15%
GDF Suez (GSZ) € 16.77 -2.13%
Veolia Environnement (VIE) € 8.42 -2.08%
BNP Paribas (BNP) € 26.46 -1.84%

JH

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