European Markets Extended Gains On Strong Economic Data

(RTTNews) - The European markets finished in positive territory again Friday, adding to the strong rally of the previous session. The euphoria from the Federal Reserve's decision late Wednesday to begin tapering its massive bond-buying program lingered at the end of the week. Investor sentiment also received a boost from strong German consumer confidence data and the unexpected upward revision to U.S. GDP. The positive economic data helped the markets to shrug off the EU's loss of its coveted AAA rating.

Standard & Poor's lowered the sovereign ratings of the European Union from 'AAA' on Friday, citing deterioration in overall creditworthiness of member states amid contentious EU budgetary negotiations.

The rating agency noted that EU budgetary negotiations have become more contentious, signaling that there is rising risks to the support of the EU from some member states.

The long-term ratings were lowered to 'AA+', while it affirmed short-term credit rating at 'A-1+'. The 'stable' outlook reflects the assessment that the risks to the long-term rating on the EU are balanced, S&P said.

The European Commission said the credit rating of European Union should be assessed on its own merits, due to the special treaty based status of the EU budget. "The Commission disagrees with S&P that member states obligations to the Budget in a stress scenario are questionable," EU Economic and Monetary Affairs Commissioner Olli Rehn said.

Standard & Poor's on Friday affirmed Britain's triple-A sovereign credit rating, citing "exceptional" monetary flexibility and bright economic prospects. However, the rating agency maintained a 'negative' outlook on the top notch ratings.

The U.K.'s long- and short-term sovereign credit rating stands at 'AAA/A-1+' at S&P. The agency noted that the country benefits from its exceptional monetary flexibility.

The decision by EU finance ministers to endorse the single resolution mechanism was the biggest leap forward for the Eurozone since the creation of the euro, European Union Council president Herman Van Rompuy said Thursday.

"I know it means a huge deal for markets and the financial world," the official said as EU leaders gathered in Brussels for this year's final summit on December 19-20. "We are truly putting the vicious link between failing banks and government finances behind us, and this will help to get the economies going again."

The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.56 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.46 percent.

The DAX of Germany climbed by 0.69 percent and the CAC 40 of France advanced by 0.40 percent. The FTSE 100 of the U.K. rose by 0.33 percent and the SMI of Switzerland gained 0.66 percent.

In Frankfurt, Deutsche Post gained 1.63 percent, following a brokerage upgrade.

In Paris, Saint-Gobain rose by 1.11 percent. The building materials company agreed to sell its U.S.-based Fiber Cement siding business to Plycem USA, a unit of Elementia of Mexico.

In London, BAE Systems tumbled by 4.50 percent, after the United Arab Emirates pulled out of a deal to buy its combat planes.

Carnival PLC increased by 3.33 percent, after it reported stronger than expected fourth quarter sales late Thursday. Credit Suisse also upgraded its rating on the stock to "Outperform" from "Neutral."

SKF AB sank by 6.00 percent in Stockholm, after the company warned it will take a provision of 3 billion Swedish kronor because of a European Commission competition probe.

German consumer confidence is set to climb to its highest level in more than six years heading into January, as favorable labor market situation and rising incomes boosted households' willingness for big-ticket purchases.

The forward-looking consumer climate index for January rose to 7.6 from 7.4 in December, a survey by the market research group GfK said on Friday. Economists had forecast the index to remain at the December level.

German producer prices declined for a fourth consecutive month in November, data from the Federal Statistical Office showed Friday. On a monthly basis, the PPI fell 0.1 percent in November. The figure matched economists' forecasts.

Germany's leading index remained unchanged at 106.7 in October, the Conference Board said Friday. The index declined 0.2 percent in September and increased 0.3 percent in August. In the six-month period ending October, the leading economic index gained 1.7 percent, with all seven components increasing.

French business confidence rose more-than-expected in December to its highest level in more than two years, data released by the statistical office INSEE showed on Friday. The business confidence index rose to 100 from 98 recorded in each of the past two months. Economists had expected the index to climb to just 99.

The British economy expanded 0.8 percent quarter-on-quarter in the third quarter, unrevised from the second estimate published on November 27, the Office for National Statistics said in the latest estimates released on Friday.

However, the statistical agency slightly revised up the GDP figure for the second quarter to show a 0.8 percent expansion compared with the previously reported 0.7 percent growth.

U.K. services sector output barely grew in October, due to weak performance by the distribution, hotels and restaurants group, data released by the Office for National Statistics showed on Friday. The index of services edged up 0.1 percent month-on-month, following a 0.2 percent gain in the previous month. Economists were looking for a 0.3 percent increase.

An index measuring consumer sentiment in the United Kingdom was down for the third consecutive month, the latest survey from GfK revealed on Friday, showing a score of -13. That missed forecasts for -11 after coming in at -12 in November.

The U.K. budget deficit increased to GBP 16.5 billion in November, the Office for National Statistics showed Friday. The shortfall was GBP 0.9 billion higher than in last year and above the GBP 15 billion expected deficit.

With consumer spending and non-residential fixed investment rising more than estimated just two weeks ago, the Commerce Department released a report on Friday showing an unexpected upward revision to the pace of U.S. economic growth in the third quarter of 2013.

The Commerce Department said gross domestic product increased by an upwardly revised 4.1 percent in the third quarter compared to the 3.6 percent growth estimated earlier this month. The upward revision came as a surprise to economists, who had widely expected the pace of GDP growth to be unrevised.