LONDON (ShareCast) - - Aggreko’s performance expected to plummet next year
- Concerns continue over whether the US will reach a budget deal
- Germany’s central bank predicts economy is set to contract

FTSE-100: -0.16%
Dax-30: 0.11%
Cac-40: -0.14%
FTSE Mibtel 30: 0.61%
Ibex 35: 0.20%
Stoxx 600: -0.08%

European equities experienced slight ups and downs at close Monday amid uncertainty over whether the US would reach a budget deal before the year-end deadline.

Concern continues to grow over the US budget and whether the government will reach a deal in avoiding the fiscal cliff of $600bn in spending cuts and tax hikes due to commence in January.

Inability to reach an agreement could result in significant index falls in the market with the US economy expected to slip back into recession.

The woes over the financial climate offset the election in Japan as the Liberal Democratic Party (LDP) won this weekend following its promise to back more economic stimulus. The LDP has pressured the Bank of Japan to carry out a stricter monetary policy.

Aggreko and KPN declines push down European stocks

Shares fell 22% at temporary power solutions group Aggreko Monday after a negative update indicating the company’s performance was expected to plummet next year. In a trading update the group said, "after a year of strong growth in 2012, the economic environment we will be facing in 2013 is particularly uncertain in many of our markets and it is difficult at this stage to provide a definitive view of the likely pattern of trading in 2013."

Dutch telecom KPN shares dropped 15% following news that the group paid an unexpectedly high figure of €1.35bn to secure 120MHz of spectrum at a government auction to obtain licences for 4G mobile networks. The transaction was much higher than the predicted price tag of around €500m, prompting the firm to cancel its dividend and cut its payout next year.

European banks in headlines

Germany’s central bank, the Bundesbank, predicted the country’s economy is set to contract in the fourth quarter this year, meaning the economy would grow by just 0.7% over the whole year instead of the 1.6% forecast in June. The bank also forecast the economy was unlikely to grow in the first quarter.

Banco Santander announced it would absorb Spanish banks Banesto and Banif, resulting in the closure of 700 branches. The bank owns all of Banif and 90% of Banesto and will buy out the minority shareholders with Santander shares. Santander expected the merger would save €520m a year in the next three years.

Slight rise in the single currency

The euro/dollar climbed 0.04% to the 1.3168 dollar level.

Front month Brent crude futures were rising slightly, by 0.037 dollars, to the 108.220 dollar per barrel mark on the ICE.

RD

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