14 August 2010 - Global Markets Review

Good Morning Ladies & Gentlemen,

I have witnessed this week the usual 'drivel' coming from the mouths of so-called 'financial experts' within the world's media.

You can tell who's on 'commission' and who's not - that's for sure!

The rallying cry from these analytical 'brains' this week has been unanimous, from New York to London and from Hong Kong to Tokyo - "buy now, stocks are cheap".

I have to say that stocks are NOT cheap and you cannot judge generic stocks on 'better than expected' earnings reports (that as mentioned last week, are not about growth, but purely cost-cutting mainly through jobs-slashing) and adding the 'sweetener' that stocks are cheap at the moment.

Cheap compared with what? Cheap compared to when they were at their record highs; sure, but they still cannot be called cheaper, 'cheaper' would be a better description!

Ladies and Gentlemen, if you think that my negativity once again abounds, please let me give you three headlines from this week - three that in my humble opinion, paint a good picture of where we are really at now, as to where the 'salesmen' would have you believe:

Picture One - Jobless Claims and Unemployment

More Americans unexpectedly filed applications for unemployment insurance last week; signaling firings stepped up as the economy slowed.

Initial jobless claims rose by 2,000 to 484,000 in the week ended Aug. 7, the highest level since mid February, Labour Department figures showed Friday in Washington. The number of people receiving unemployment benefits dropped, while those getting supplemental benefits surged by 1.34 million reflecting the government's extension of eligibility.

Companies may be losing confidence in the recovery and are hesitant to hire, raising the risk of further erosion in consumer spending, the biggest part of the economy. Federal Reserve policy makers this week said growth "is likely to be more modest" than they previously projected, prompting central bankers to take additional steps to spur a rebound.

Economists forecast claims would fall to 465,000, according to the median of 42 projections. Estimates ranged from 450,000 to 480,000. The government revised the prior week's claims figure up to 482,000 from a previously reported 479,000.

Prices of goods imported into the US rose in July for the first time in three months, led by higher fuel costs, another Labour Department report showed Friday. The 0.2% increase in the import-price index was smaller than projected and followed a 1.3% June drop. Prices excluding energy fell 0.3%.

There were no special factors influencing last week's data, a Labour Department spokesman told reporters as the figures were being released.

The four-week moving average of claims climbed to 473,500 from 459,250, Friday's report showed.

The number of people continuing to collect unemployment benefits fell by 118,000 to 4.45 million in the week ended July 31, from 4.57 million the prior week.

The continuing claims figure does not include those receiving extended benefits under federal programs. The number of Americans who've used up traditional benefits and are now collecting emergency and extended payments soared by 1.34 million to 5.28 million in the week ended July 24. That was the week legislation resuming eligibility went into effect.

While companies have added workers to their payrolls seven straight months, firings have remained elevated as the economic recovery shows signs of slowing. Private firms added 71,000 jobs in July, fewer than economists had forecast, according to government figures released on 6 August.

CareFusion, the maker of products to reduce hospital infections and monitor medical safety, said Tuesday it will cut about 700 jobs as part of a restricting designed to eliminate layers of management and lower costs. The San Diego-based company employs more than 15,000 people, it said this week, and was spun off last year from Cardinal Health Inc.

Congress this week passed legislation providing $26 billion in aid to state governments that is designed to prevent thousands of layoffs of teachers and other public service employees.

Weaker sales and declining income tax revenue have left states with budget gaps totaling $84 billion, according to the National Conference of State Legislatures. Every state except Vermont is required to balance its budget, forcing spending cuts, tax increases or both -- actions Fed Chairman Ben S. Bernanke said last week are contributing to the nation's sluggish recovery.

The Fed on Aug. 10 held its benchmark interest rate at a record low and announced it will reinvest principal payments on mortgage holdings into long-term Treasury securities, an effort to bolster economic growth.

"The pace of economic recovery is likely to be more modest in the near term than had been anticipated," the Federal Open Market Committee said in a statement in Washington. "To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve's holdings of securities at their current level."

Picture Two - Housing Foreclosures

Nan Holmes, a senior escrow officer at a title insurer, says her insider's view of the local market gave her the confidence three years ago to pay $370,000 for a new home in Boise, Idaho. She got a price she liked from the builder and 100% bank financing.

That was before the bottom fell out of the housing market in California, Nevada and Florida as borrowers with bad credit began defaulting in record numbers, setting off a recession. Holmes, who had earned $150,000 a year when real estate was booming, saw her compensation shrink by half when business cooled, forcing her to dip into savings and sell jewelry. She stopped paying the mortgage in April and has put the house on the market for $145,000 less than she owes the bank.

"How long will it take for the market to turn so I can just break even?" Holmes, 55, said as she sat in her house in Boise's tree-lined Collister neighborhood, four miles (6.4 kilometers) from the state capitol.

Home foreclosures are climbing in the Northwest and Midwest, areas that had earlier dodged the worst of the mortgage crisis, according to real estate data firm RealtyTrac Inc. With 14.6 million Americans out of work and consumer spending declining, further weakness in housing could push the economy back into recession, former Federal Reserve Chairman Alan Greenspan said Aug. 1.

Foreclosure rates in Utah, Idaho, Illinois and Colorado rose in the second quarter compared with a year earlier, and rank among the 10 highest in the country. The number of homes seized by lenders at least doubled in 19 states and more than tripled in seven of them, according to Irvine, California-based RealtyTrac.

Last month, 325,229 US properties got a notice of default, auction or bank repossession, RealtyTrac said Friday in a report. While that's an increase of 4% from June, the number was down almost 10% from a year earlier. One in 397 households received a filing. Lenders seized 92,858 properties in July, the second-highest monthly tally since RealtyTrac began records in January 2005.

"The numbers are exploding due to unemployment and economic displacement," said Rick Sharga, senior vice president of marketing at RealtyTrac. "We will see them get a lot worse unless we see some job creation."

Initial jobless claims rose in July and unemployment stood at 9.5%, near a 27-year high, Labour Department figures show. More than 4.5 million people are collecting unemployment benefits and an additional 3.9 million are getting emergency and extended payments. Fed Chairman Ben S. Bernanke told Congress on July 21 the outlook is "unusually uncertain."

Chicago lost 76,000 jobs in the year through June, the most in any metropolitan area tracked by the US Bureau of Labour Statistics. Denver lost 18,900, Detroit 18,700. Employment dropped 4.1% in Grand Junction, Colorado, and 2.7% in Bend, Oregon, the data show.

Home seizures soared 822% in Idaho in the second quarter, and the state had the seventh-highest foreclosure rate, according to RealtyTrac. Boise's median house price was $140,100 in the quarter, down 34% from the peak $212,800 in 2007, the National Association of Realtors said Thursday.

The metropolitan area, home to a third of Idaho's 1.54 million residents, has been pummeled by housing-related construction and retail job losses, as well as layoffs at chipmaker Micron Technology Inc. and grocer Albertsons, said Michael Ferguson, the state's chief economist.

Idaho's jobless rate was 8.8% in July, up from 8.2% a year earlier and 2.9% in July 2007.

In Charter Pointe, a development built on corn fields 11 miles from downtown, more than half of the homes listed for sale are bank-owned or "underwater," meaning the property is worth less than the mortgage. Dairy cows wander in a nearby pen, and baling machines grind into the night.

Micron, founded in Boise in 1978 with early investors including the late potato mogul J.R. Simplot, cut local production and 1,500 jobs last year as chip prices fell. The company has more than 5,000 full-time workers in the area, said Daniel Francisco, a Micron spokesman. It employed twice that number as recently as 2001, Ferguson said.

Albertsons cut its local payroll following a 2006 buyout by companies including Eden Prairie, Minnesota-based Supervalu Inc. and private-equity firm Cerberus Capital Management LP of New York. The acquisition ended seven decades of Boise ownership for the grocery chain and its plans for as many as 1,000 new hires, the state economist said.

Idaho lost 6.9% of its jobs from 2008 through 2009, compared with the 4.9% US average, and its timber industry payrolls fell 38%, according to IHS Global.

Government workers and services haven't been spared. The state budget, which peaked at $3 billion in 2008, dropped by a fifth to $2.38 billion in the fiscal 2011 year that began July 1. More than 200 positions were cut and furloughs imposed in agencies including health and welfare, tax collection and the attorney general's office, Ferguson said.

Holmes said her company, TitleOne Corp., is down to 80 employees from a high of 175 in 2007. Her lender, Bank of America Corp. of Charlotte, North Carolina, took the first step toward foreclosure in July.

Holmes, a divorced mother of two, put her house on the market in June and has applied for a federal program that offers incentives to loan servicers, investors and homeowners to complete short sales, in which the bank accepts less than what it is owed on the mortgage.

She's asking $225,000 and hasn't had an offer. A third of real estate listings in her area are distressed properties, with seven months of inventory on the market in Boise at her price.

Picture Three - The US is Bankrupt

Let's get real. The US is bankrupt. Neither spending more nor taxing less will help the country pay its bills.

What it can and must do is radically simplify its tax, health-care, retirement and financial systems, each of which is a complete mess. But this is the good news. It means they can each be redesigned to achieve their legitimate purposes at much lower cost and, in the process, revitalize the economy.

Last month, the International Monetary Fund released its annual review of US economic policy. Its summary contained these bland words about US fiscal policy: "Directors welcomed the authorities' commitment to fiscal stabilization, but noted that a larger than budgeted adjustment would be required to stabilize debt-to-GDP."

But delve deeper, and you will find that the IMF has effectively pronounced the US bankrupt. Section 6 of the July 2010 Selected Issues Paper says: "The US fiscal gap associated with Friday's federal fiscal policy is huge for plausible discount rates." It adds that "closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14% of US GDP."

The fiscal gap is the value Friday (the present value) of the difference between projected spending (including servicing official debt) and projected revenue in all future years.

To put 14% of gross domestic product in perspective, current federal revenue totals 14.9% of GDP. So the IMF is saying that closing the US fiscal gap, from the revenue side, requires, roughly speaking, an immediate and permanent doubling of personal-income, corporate and federal taxes as well as the payroll levy set down in the Federal Insurance Contribution Act.

Such a tax hike would leave the US running a surplus equal to 5% of GDP this year, rather than a 9% deficit. So the IMF is really saying the US needs to run a huge surplus now and for many years to come to pay for the spending that is scheduled. It's also saying the longer the country waits to make tough fiscal adjustments, the more painful they will be.

Is the IMF bonkers?

No. It has done its homework. So has the Congressional Budget Office whose Long-Term Budget Outlook, released in June, shows an even larger problem.

Based on the CBO's data, there is a fiscal gap of $202 trillion, which is more than 15 times the official debt. This gargantuan discrepancy between the "official" debt and the actual net indebtedness isn't surprising. It reflects what economists call the labeling problem.

Congress has been very careful over the years to label most of its liabilities "unofficial" to keep them off the books and far in the future.

For example, Social Security FICA contributions are called taxes and future Social Security benefits are called transfer payments. The government could equally well have labeled contributions "loans" and called future benefits "repayment of these loans less an old age tax," with the old age tax making up for any difference between the benefits promised and principal plus interest on the contributions.

The fiscal gap isn't affected by fiscal labeling. It's the only theoretically correct measure of the long-run fiscal condition because it considers all spending, no matter how labeled, and incorporates long-term and short-term policy.

How can the fiscal gap be so enormous?

Simple. The US has 78 million baby boomers who, when fully retired, will collect benefits from Social Security, Medicare, and Medicaid that, on average, exceed per-capita GDP.

The annual costs of these entitlements will total about $4 trillion in Friday's Dollars. Yes, the US economy will be bigger in 20 years, but not big enough to handle this size load year after year.

This is what happens when you run a massive Ponzi scheme for six decades straight, taking ever larger resources from the young and giving them to the old while promising the young their eventual turn at passing the generational buck.

Herb Stein, chairman of the Council of Economic Advisers under US President Richard Nixon, coined an oft-repeated phrase: "Something that can't go on, will stop." True enough. Uncle Sam's Ponzi scheme will stop. But it will stop too late.

And it will stop in a very nasty manner. The first possibility is massive benefit cuts visited on the baby boomers in retirement. The second is astronomical tax increases that leave the young with little incentive to work and save. And the third is the government simply printing vast quantities of money to cover its bills.

Most likely we will see a combination of all three responses with dramatic increases in poverty, tax, interest rates and consumer prices. This is an awful, downhill road to follow, but it's the one the US is on.

And here's the scary reality; bond traders will kick the US down our road once they wake up and realize the US is in worse fiscal shape than Greece.

Some doctrinaire Keynesian economists would say any stimulus over the next few years won't affect the US's ability to deal with deficits in the long run.

This is wrong as a simple matter of maths. The fiscal gap is the government's credit-card bill and each year's 14% of GDP is the interest on that bill. If it doesn't pay this year's interest, it will be added to the balance.

Demand-siders say forgoing this year's 14% fiscal tightening, and spending even more, will pay for itself, in present value, by expanding the economy and tax revenue.

My reaction? Get real, the US is broke!

Ladies and Gentlemen, reading the above, you can be forgiven if you think I'm on another 'rant' about the US and its problems. But seriously, it's not just the US.

The Greek economy contracted sharply in the second quarter as government austerity measures bit deeper into incomes, according to government data released Thursday. Unemployment in Greece has now touched a record 12%.

The consensus is that the Greek recession is getting far worse.

You probably think that I am just picking on the countries with obvious problems; well no.

Australia's unemployment rate rose to 5.3% in July as the number of people entering the work force outpaced growth in new jobs.

A total of 631,800 people were unemployed in July, up from 607,200 the previous month, which lifted the unemployment rate from June's 5.1%.

But here is the very worrying fact.

The unemployment rate of young people around the world has reached its highest levels ever and is expected to increase, according to a new International Labour Office (ILO) report. Of the world's 620 million youths, ages 15 to 24, 80.7 million were jobless in 2009. The number is expected to reach 81.2 million by year-end 2010.

Due to the global economic crisis, the youth unemployment rate increased to 13% in 2009 from 11.9% in 2007.

This alone strengthens my opinion (and don't forget Ladies and Gentlemen, this is just my opinion) that the global economic and financial crisis is not over and never will be until rising unemployment is brought under control.

And in my eyes, we are far, far away from that point at the moment.

On to the numbers on the boards for the week that was and the 'pattern' I mentioned last week continued; 2 days down, 3 days up .... but this time markets certainly looked less certain as to why/how they were making any gains at all!

On to the numbers for the week:

US Markets

How the US did this week .....

US Summary US stocks edged lower on Friday after tepid consumer and retail sales data failed to revive investor confidence.

The S&P 500 closed down 0.4% to 1,079.26, falling 3.8% for the week, while the Dow Jones Industrial Average had lost 0.2% to close at 10,354.92, lower by 3.3% on the week. The Nasdaq Composite closed 0.8% lower at 2,173.48, down 5% over the five days.

Fears about the pace of the economic recovery dominated markets this week after the Federal Reserve downgraded its outlook for the economy.

Weak Chinese economic data weighed on the industrials, materials and energy sectors. Data showed on Friday that US retail sales rose less than expected in July, up 0.4% compared with a forecast increase of 0.5%.

Excluding cars and petrol, purchases fell 0.1%, showing that underlying consumer confidence remained shaky.

Separate data showed that the consumer price index rose 0.3% and by 0.1% excluding food and energy.

The University of Michigan's consumer sentiment index rose slightly more than expected in August but investors were un-moved by the data. The S&P 500 consumer discretionary sector declined 1.1%, with the S&P 500 retailers down 1.4%.

JC Penney, the department store chain, warned of an "uncertain" outlook for consumer spending and lowered its profit forecast for the year. It projected a profit of $1.50 a share compared with a previous forecast of about $1.64.

In the last quarter, revenue met analyst expectations and net income rose to $14m compared with a loss of $1m for the same period last year. Its shares fell 4.7% to $19.82.

Nordstrom dropped 7.2% to $31.05 after it maintained its full-year forecast and said its expenses rose. The chain reported earnings in line with analyst expectations.

In other earnings news, Nvidia rose 4.8% to $9.39 in spite of a widening in its quarterly loss.

The chipmaker said profit margins would rise in the third quarter because of a new range of products. It was reported that the company was working on a microprocessor for tablet devices that would compete with Intel products. Intel fell 1.5% to $19.15.

DeVry, the operator of for-profit further education colleges, enrolled more students, revenue rose and earnings for the fourth quarter almost doubled to a better-than-expected 99 cents per share.

But it fell 5.7% to $42.71 ahead of a Department of Education report on its proposed requirements for student loan eligibility.

In deal news, Blackstone Group agreed to acquire the Texas power producer Dynegy for $4.50 a share, a 62% premium on Thursday's closing price.

After Blackstone assumes Dynegy's debt, the acquisition's value will total about $4.7bn.

Blackstone will sell four natural gas-fired assets, owned by Dynegy, to NRG Energy for about $1.36bn in cash. Dynegy surged 59% to $4.42, Blackstone fell 3.5% to $10.63 and NRG Energy was down 2% to $21.96.

Vaccine biotechnology company Emergent Bio-Solutions said it had agreed to buy Trubion Pharmaceuticals for up to $135.5m in cash and shares as it tried to expand its product pipeline into oncology and autoimmune diseases.

Emergent Biosolutions fell 5.8% to $17.43 while Trubion Pharmaceuticals soared 50% to $4.50.

European Markets

What has been happening in Europe this week .....

Europe Summary European stocks gained, paring this week's decline for the Stoxx Europe 600 Index, after a private report in the US showed consumer confidence rose more than economists estimated.
Aviva surged 5.5% as two people with knowledge of the situation said RSA Insurance Group made a 5 billion- Pound ($7.8 billion) bid for Aviva's general insurance business in the UK, Canada and Ireland. Schibsted ASA, Norway's largest media company, jumped 12% after reporting second-quarter profit that topped analysts' estimates.

The Stoxx 600 climbed 0.3% to 255.56 at the 4:30 p.m. close in London, paring this week's decline to 1.2%. The measure swung between gains and losses at least eight times Friday as a report showed faster-than-forecast expansion in the 16-nation Euro area, while investors speculated that the region's economy may still stall later this year, dragged down by the indebted nations on Europe's periphery.

The Stoxx 600 remains 6.1% below this year's high reached April 15 amid concern that austerity measures by European governments to curb deficits will harm the economy. Almost $2 trillion has been wiped off the value of global equities this week as the Federal Reserve on Aug. 10 said the pace of recovery will probably be "more modest" than forecast.

National benchmark indexes rose in 8 of the 18 western European markets Friday. The UK's FTSE 100 gained 0.2%. France's CAC 40 dropped 0.3% and Germany's DAX retreated 0.4%.

The Stoxx 600 has climbed 10% from this year's low on May 25 as corporate earnings helped alleviate concern about the economy. About 55% of the 272 companies in the Stoxx 600 to have posted results since July 12 have topped net income estimates, according to data compiled by Bloomberg. That compares with 64% of the 436 companies on the S&P 500 that reported during the same period, the data show.

Schibsted surged 12% to 144.5 kroner, the biggest gain since November. The company reported second-quarter net income of 710 million kroner ($114 million), topping the 586 million-krone average of four analysts' estimates surveyed by Bloomberg.

Schindler Holding AG climbed 6.1% to 96.75 Swiss francs, as it announced a plan to merge one of its businesses with a unit of Droege International Group AG.

ThyssenKrupp AG, Germany's largest steelmaker, climbed 1.5% to 23.15 Euros after raising its forecast for 2010 profit.

GERMANY

German stocks retreated as concern that European governments will struggle to repay their debt overshadowed an increase in US consumer confidence and the fastest rate of economic growth in Germany since reunification.

The benchmark DAX Index fell 0.4% to 6,110.41. The gauge posted a weekly loss of 2.4%, its biggest drop in six weeks, after the Federal Reserve said the pace of recovery in the US economy will probably be "more modest" than forecast. The HDAX Index slipped 0.3% Friday.

Stocks fell even after German gross domestic product surged 2.2% from the first quarter. The country has benefited from a recovery in global demand after last year's recession just as the Euro's drop against the Dollar in 2010 has made its exports more competitive outside the region. At the same time, European governments are cutting spending to rein in ballooning budget deficits, threatening to slow growth in coming months.

BASF, the world's biggest chemicals company, slid 1.7% to 43.80 Euros. Germany's policy of shutting down nuclear plants, winding down coal-powered energy production and subsidizing renewable energy will result in a long-term de- industrialization of the country, Boersen-Zeitung reported, citing BASF Chief Executive Officer Juergen Hambrecht.

Volkswagen, Europe's largest carmaker, dropped 1.2% to 77.02 Euros. The company said it doesn't expect auto markets to reach pre-crisis levels this year after its sales growth last month slowed to 2.9%.

E.ON and RWE, Germany's largest utilities, fell 1.6% to 22.70 Euros and 0.8% to 53.22 Euros. The two stocks together account for more than 12% of the benchmark DAX Index by weighting, according to Bloomberg data.

ThyssenKrupp increased 1.5% to 23.15 Euros. The country's biggest steelmaker raised its earnings outlook for the current fiscal year after reporting quarterly profit that beat analysts' estimates.

K+S advanced for the first time this week, adding 2.5% to 42.33 Euros after Europe's largest potash producer was upgraded to "neutral" from "underperform" by analysts at Exane BNP Paribas.

Carl Zeiss Meditec rose 1.2% to 11.80 Euros as the maker of medical lasers to correct vision defects was raised to "overweight" from "neutral" at HSBC Holdings.

The German economy may grow 2.5% this year, an economist at Halle-based think tank, IWH, reportedly said Tuesday. The think tank previously forecast 2% growth for 2010.

Talking to German newspaper Berliner Zeitung, IWH's economic expert Udo Ludwig said if emerging economies fail to maintain their growth momentum, it will reflect on German growth.

In July, German Economy Minister Rainer Bruederle said the biggest Eurozone economy is expected to grow 2% this year. The Bundesbank forecasts 1.9% growth.

German insolvency courts reported 2,692 business insolvencies in May, which represents a 1.1% increase from a year ago, figures released by the Federal Statistical Office showed on Wednesday.

Consumer insolvencies totaled 8,552 in the same month, up 14.1% from May 2009. Total insolvenices were up 7.7% to 13,477.

From January to May, a total of 13,716 businesses went insolvent, represing a 2.7% increase from the same period a year ago. Consumer insolvencies increased 11.8% in the same period, while total insolvencies were up 7.6%.

FRANCE

France's CAC 40 Index fell 10.16, or 0.3%, to 3,610.91 at the 5:30 p.m. close in Paris. The SBF 120 Index lost 0.2%.

Adecco added 0.5% to 38.64 Euros, gaining for the first day in four. BofA Merrill Lynch removed the world's largest supplier of temporary workers from its "most preferred" stocks in the European business services industry and added it to the "least preferred," saying that the "persistence of poor economic data should lead to underperformance."

Fromageries Bel added 1.6% to 142.40 Euros, the highest since July 14. The cheese maker agreed to pay suppliers more for milk, raising the price by nearly 10% to 330 Euros per 1,000 liters.

Store Electronic declined 2.6% to 9.60 Euros, dropping for a third day. The maker of public address systems said sales fell to 20.9 million Euros in the first half from 30.1 million Euros a year earlier.

Veolia Environnement fell 2% to 20.05, dropping for a seventh day. The world's biggest water company tracked losses in utilities stocks across Europe. A gauge of the industry showed a fall of 0.4%.

France's current account balance, which is the broadest measure of the country's trade balance, recorded a smaller deficit in June than in May, official figures showed on Wednesday.

The Bank of France said a current account deficit of Eur 2.7 billion was recorded in June. This compares to a Eur 4 billion deficit in the previous month.

The goods account deficit narrowed to Eur 4.2 billion in June from Eur 5.5 billion in the preceding month. The services account surplus was unchanged at Eur 1.3 billion.

Meanwhile, the income account surplus rose to Eur 2.4 billion from Eur 2.3 billion in the prior month. The transfers account deficit was unchanged at Eur 2.1 billion.

Meanwhile, the financial account recorded a deficit of Eur 26 billion in June, up from Eur 4.9 billion in the preceding month.

French industrial production dropped more than expected in June as manufacturing output fell led by a sharp decline in vehicle production.

Industrial output fell 1.7% month-on-month in June following a revised 1.9% rise in May, data released by statistical office Insee showed Tuesday. The decline exceeded economists' expectations for a 0.2% drop. The annual growth rate of industrial production eased to 5.7% from previous month's 8.5%.

Manufacturing output dropped 1.3% on a monthly basis after a revised increase of 0.6% in May. It fell for the first time this year. Manufacture of food products and beverages declined 0.8% in June after a 0.8% rise in May. Vehicle output slipped 7.4%, reversing the 4.8% growth in the previous month.

On an annual basis, total manufacturing output rose at a slower pace of 5% compared with the 7.8% increase recorded in May. In the second quarter, total industrial production rose 0.8% sequentially, while manufacturing production increased 1.3%.

Construction output rose 0.1% month-on-month in June after a 0.5% rise in May. On an annual basis, output fell 2.5%, extending the fall that started in February 2008. In the second quarter, construction output was down 0.2%.

Although activity weakened in the second quarter, the industrial sector is likely to give some support to economic growth. The Bank of France forecast that the French economy probably expanded 0.4% during April to June. Insee is due to release preliminary GDP figures for the second quarter on August 13.

Survey results released by the Bank of France showed Thursday that industrial sentiment stabilized for the second month in July. In the short-term, the central bank expects slight growth in production levels.

BELGIUM

The Bel 20 in Brussels ended the week at 2,485.70, a Friday dip of 0.81%.

Belgian families are by far the richest in the Eurozone, according to a new report from ING Bank, citing statistics from Eurostat.

Measured in late March, the net worth of Belgians reached 916 billion Euros, or 210% of GDP, by far the highest rate in the 16-country Eurozone. Italy and Germany are in second and third place.

At the end of June 2007, when stock indexes were higher, this same figure for Belgium was estimated at 882 billion Euros. The low, at 795 billion Euros, was reached at the end of 2008.

Belgian families' accumulation of so much wealth is not attributable to investment acumen, but rather to Belgians' enthusiasm for savings; the typical Belgian family has 156,000 Euros in savings and investments. According to Philippe Ledent and Oscar Bernal, the paper's authors, Ricardian economic principles are at work, and that "households save when the state borrows...in anticipation of higher future taxes needed to repay this debt."

The rate of return on both savings accounts and Belgian government bonds are now down to levels last seen during the Second World War.

Investors' return on a 10-year government bond is now around 3%, and most savings accounts currently yield less than 2%, reported both La Libre Belgique and La Dernière HEure.

The world's biggest brewer Anheuser-Busch InBev reported increased 2010 second quarter earnings on Thursday -- citing better weather and the impact of the World Cup.

The brewer of flagship brands including Budweiser, Stella Artois and Beck's reported net profits of 1.149 billion Dollars (778 million Euros), beating expectations of a seven-percent rise compared to the same period in 2009.

Created in November 2008 when Belgian-Brazilian brewer InBev bought US giant Anheuser-Busch for 52 billion Dollars, revenue nevertheless slipped to 9.174 billion Dollars.

The beer market has shrunk in traditional territories including north America and western Europe, but Russia and other "high potential key georgraphies" mean it said the outlook was for continued growth in the coming two quarters.

The company said in January it was to cut 10% of its 8,000-strong workforce across Europe.

THE NETHERLANDS

In Amsterdam the AEX headed into the weekend on 323.92, dropping 0.06% in the process.

The volume of exports from the Netherlands in June was 14% higher than a year earlier, the Central Bureau of Statistics said on Wednesday. Import volume, meanwhile, increased by 20%.

In value terms, exports of goods amounted to Eur 32.3 billion, while import value came in at Eur 29.6 billion. A trade surplus of Eur 2.7 billion was recorded.

Export and import prices also surged in June. Export prices were 8.1% higher than a year earlier, while import prices were 7.6% higher.

Amsterdam's airport Schiphol has become the sole owner of Terminal 4 at New York's JFK airport. This is the first time that a foreign company has taken control of an airport terminal in the United States. Schiphol already owned 40% of the terminal's shares. Now, for a further 13 million Dollars, it has purchased the remaining 60%.

Schiphol will be able to charge fees to all airline companies wishing to make use of the terminal. In the coming years, the terminal is to be expanded from 16 to 25 gates. The biggest customer will be Delta Air Lines, which is a partner of the Air France-KLM company.

Airline companies try to transport as many passengers from a single airport on one continent to a single airport on another continent. This enables them to carry travellers via their own network, or that of a partner, to the final destination. This is known as the 'hub system'. Jos Nijhuis, Schiphol's CEO, says the purchase will, "Considerably strengthen the position of Amsterdam as European hub for the US. That will lead to extra [flight] traffic to Amsterdam."

Camiel Eurlings, the Dutch caretaker transport minister, commented that, "This is not only financially lucrative, but also strategically important. There are only a few European airports left with global importance. The rest are fading away to the regional level, handling only European flights."

Dutch bank and insurance company ING Groep NV posted a sharp rise in second-quarter earnings from the year-ago period, which was dragged down by losses on stocks, bonds and real estate investments.

Net profit rose to 1.09 billion Euros ($1.44 billion) from 79 million Euros. A strong performance by its banking arm outweighed a loss in insurance, which was hurt by the sharp decline in equity markets in the quarter.

ING plans to sell its insurance arm as part of a deal with European regulators after it received state aid during the financial crisis. Some analysts believe the division's volatile earnings could lower its price tag.

A rumour that cash machines in the Netherlands were dispensing free money triggered an avalanche of rumours on Twitter on Wednesday evening. A spokeswoman for ING Bank, however, denied that a technical fault in the country's electronic paying system caused the cash machines to hand out banknotes without charging the client's account.

The error put ING's own electronic tills out of action for four hours, and its clients were advised to carry out their money withdrawals at other banks' cash dispensers. This led to rumours that people at a Rabobank machine in The Hague were able to withdraw hundreds of Euros from their ING accounts without the bank being aware of it.

A long cue of people formed at the The Hague machine, and the rumour did the rounds on Twitter; many participants, however, pointed out that ING Bank would be able to trace anyone who had benefited from any unregistered cash withdrawals and would reclaim the money later.

SWITZERLAND

Zurich's SMI drew a line under the trading week at 6,294.34, a gain of 0.24% on the day.

Switzerland now expects to book a 600 million franc budget surplus this year rather than the previously planned 2 billion deficit, thanks to a surprisingly strong economic recovery, the Federal Finance Ministry said on Wednesday.

The ministry attributed the improved performance to higher than-expected tax revenues in the first half of the year.

The Swiss economy has emerged less bruised from the economic crisis than many other European countries and the Swiss central bank expects healthy growth of about 2% for this year.

Switzerland only launched relatively small economic stimulus programmes in the crisis and the federal government ran up a surplus even in the recession year 2009, partly thanks to a profit from its bailout of the country's largest bank UBS

Swiss consumers remained optimistic in the third quarter after regaining confidence in the second quarter, survey results released by the State Secretariat for Economic Affairs showed Tuesday.

According to the latest survey, the consumer confidence index logged 16 points in July following 14 points in April. It was the highest reading since April 2007. But, the reading was less than the expected figure of 18 points.

The July survey found that consumers expect to see an improvement in their own potential to put money aside in the coming months. The corresponding indicator rose to 27 points from 15 recorded in the previous survey period.

However, households' assessment of the expected economic situation was slightly less optimistic with the indicator dropping to 33 points from 44 in April. Expectations regarding the trend in unemployment decreased and respondents' personal financial situation rose slightly.

SECO said the remaining sub-indices of the survey, which are not used to calculate the overall index, all developed relatively positively.The assessment of the past economic situation turned optimistic, while pessimism regarding job security lessened. A gauge for households' current potential to put money aside in the form of savings increased. There were slight improvements in consumers' assessments of the past personal financial situation and of the right time to make major purchases.

Further, the survey revealed that households revised down their assessment of the price development in the past twelve months from the April survey. They also lowered their expectations for the coming twelve months regarding inflation. SECO said both indexes have now been below their long-term average values for seven quarters. Official data showed earlier this month that consumer price inflation eased to 0.4% in July from 0.5% in June.

Although the consumer confidence index showed slight improvement, investor sentiment plunged in July. A monthly survey jointly conducted by the Credit Suisse and ZEW revealed in July that economic sentiment indicator dropped 15.3 points to 2.2.

The Swiss National Bank expects real GDP growth of about 2% this year. The economy had expanded 0.4% sequentially in the first quarter following 0.9% growth in the fourth quarter of 2009.

AUSTRIA

The ATX in Vienna rounded out the Friday session and the week at 2,416.74, up 0.64%.

Austrians spent 10.3% more on real estate in "crisis year" 2009 than in 2008, according to a research.

Real estate company Re/Max said Friday (Weds) building sites and owner-occupied flats changed their owners for 8.8 billion Euros last year, up by 10.3% year on year. The firm explained an overall 45,366 objects were sold in 2009.

Most money was traditionally spent in the capital Vienna which grabbed a 26.8% stake of overall sums, while eastern Burgenland came last among Austria's nine provinces (1.4%).

Re/Max also found that owner-occupied apartments cost an average 127,210 Euros.

Flats in Vienna were purchased for 137,041 Euros on average, while apartments in the western province of Vorarlberg were most expensive (169,594 Euros).

Thomas Malloth of the Federal Economic Chamber's (WKO) real estate department said recently the value of owner-occupied flats rose by 3.5% from 2008 to 2009 as an increasing number of people see condominiums as a safe haven for their money in economically difficult times.

Champagne and wine maker Schlumberger has reported sparking figures for the first quarter of its 2010/2011 business year.

The Viennese firm said Tuesday that turnover rose by 4.3% to 50.6 million Euros year on year, while its earnings before interest and taxes (Ebit) doubled from 175,000 Euros to 360,000 Euros.

Schlumberger claimed it's success was due to having made the right decisions in taking over rival Hochriegl and selling struggling subsidiary Appelt to food firm Maresi.

It added the number of staff declined from 223 to 210 year on year. Schlumberger runs branches in Austria and subsidiaries in Germany and in the Netherlands.

Businessman Julius Meinl V. and fellow decision-makers of the family's business empire have been confronted with a multi-billion claim for damages.

Real estate company Atrium, formerly Meinl European Land, launched the 2.1-billion-Euro bid at London's High Court of Justice Wednesday. It is the highest sum ever demanded in court from an Austrian firm.

MEL was founded by Meinl Bank and registered at the Vienna Stock Exchange in 2008. Bettina Knötzl, a lawyer for Atrium, explained Friday the company demanded compensation for "losses and damages" suffered in controversial business operations.

Knötzl branded Julius Meinl V. - who has a British and an Austrian passport - as the "mastermind of the malversations". She claimed several e-mails would confirm her claims.

Thomas Huemer, a spokesman for Meinl Bank, labelled the legal action as "absurd and populist" Friday, adding it "has a blackmail character".

SWEDEN

The OMX in Stockholm completed a hectic trading week on 1,036.45, up 0.51% for the session.

Many Swedes with short-term fixed-rate mortgages will face higher bills from now on, after state-owned mortgage lender SBAB and Nordic bank Nordea both raised rates. But mortgages fixed for three years or more will become cheaper, SBAB said.

After the changes, SBAB's three-month fixed rate mortgages will attract a standard interest rate of 2.25%, a rise of 0.07 points. Two-year fixed-rate deals are unchanged at 2.9%.

Interest rates on five-year fixed-rate mortgages at SBAB are being reduced by 0.07 points to 3.95%. Ten-year fixed-rate deals are being reduced by 0.16 points to 4.68%.

The changes by SBAB also affect customers of its partners - ICA Banken, Ikano Bank, Nordnet Bank, Salus Ansvar and Bank 2.

Nordea announced on Wednesday that it would also raise rates on short term fixed rates, effective from Thursday. Their 3-month rate would rise by 0.03 percentage points, while their one-year fixed rate would rise by 0.05 percentage points. The new three-month rate will therefore be 2.18, while the new one-year rate will be 2.30, the bank said in a statement.

Nordea's 5-year fixed rate mortgage will fall by 0.1 percentage points to 3.89%. The one-year fixed-rate will fall by 0.1 points to 4.59%. Rates on mortgages fixed for between two and four years are unchanged.

Inflation expectations among the Swedish money market players have increased modestly, while they forecast faster tightening of the key interest rate in the coming two years, a survey commissioned by the Swedish central bank showed Wednesday.

The survey, undertaken by TNS SIFO Prospera, showed that the money market players expects an inflation rate of 1.7% in the next 12 months compared to 1.6% forecast in the previous survey.

Meanwhile, money market expects the central bank to increase the repo rate at a faster pace over the coming twelve months as well as in next two years. Repo rate for the next 12 months is seen at 1.6%, slightly faster than the 1.4% previously forecast.

Furthermore, repo rate will be hiked to 2.5% in the next two years, faster than the 2.4% projected earlier. This would be tightened further to 3.3% five years out.

Inflation over the next two years is seen at 1.2%, which is the same rate projected in the previous survey. The survey projects inflation to be 2.1% over next five years, slightly slower than the 2.2% seen in the previous survey.

On July 1, Riksbank had hiked the repo rate by 25 basis points to 0.5% and in June, Swedish inflation eased to 0.9% from 1.2% in May.

The economy is projected to grow 3% over the 12 months and slow thereafter to 2.8% in the next two year's time. Compared to previous survey, panelists has revised up their expectations for the economic growth.

Mats Jansson, President and CEO of troubled Scandinavian airline SAS, has announced that he plans to leave his position in the autumn.

"Next year, I turn 60 and that is also when my contract expires. I believe that I have done my share for SAS," Jansson wrote in a company press release on Tuesday.

The board has begun the search for a suitable replacement for Jansson, who has held the position since January 2007.

SAS has faced significant financial challenges for a number of years in the face of competition from low cost carriers such as Norwegian and Ryanair as well as the impact of the global economic slowdown and Icelandic ash cloud. Massive savings and austerity programmes have been carried out and new billions have been attained from owner rights issues on a number of occasions.

"My decision to leave the company was not easy. It has been four exciting and demanding years to run a company in such a dynamic sector, where no two days are the same. I have received strong support from the Board, the management team and, in particular, from all the SAS employees, who do a fantastic job and who have truly given their all to SAS during this highly critical and financially difficult situation," said Mats Jansson.

DENMARK

Copenhagen's OMX closed out the Friday trading session on 412.99, a Friday gain of 0.07%.

The financial crisis had cost Danish banks 105 billion kroner up until the end of 2009, the equivalent of what it costs to build six Storebælts Bridges, writes Berlingske Tidende. The report also revealed that were it not for the state aid packages, the banks would have lost up to three times as much.

The figures are not as high as initially expected, and they are still in balance with the crisis of the early 1990s and much lower than that of the 1920s, with which it was heavily compared to. In the banking crisis of the early 1990s, Danish banks lost an average of 1.5% of the complete balance per year from 1990 to 1993. In 2008 and 2009, they lost 0.78% and 1.57% respectively. During the 1920s, this figure was close to 6%.

However, were it not for the state aid packages, the actual loss is thought to have been significantly higher, most probably not far from that during the crisis of the 1920s.

The crisis is not completely over for the banks, though, as they are expected to continue to lose money over the next few years, and the Danish population will continue to feel some of the effects.

The market leader Danske Bank has suffered the most in the crisis, so far losing 42 billion kroner. The bank, which controls approximately a third of the banking sector in Denmark, will release its first half 2010 figures tomorrow.

Second on the list was Roskilde Bank, which went bankrupt, and in third place was pan-Nordic bank Nordea.

A Tax Ministry investigation into company's tax payments for the period 2006-2008, shows that half closed out at least one year owing no taxes. Tax Minister Troels Lund Poulsen described the results as a direct indication that tax evasion was taking place.

The investigation shows that during the given time period - a period of economic growth - only half of the firms paid taxes and, for 28% of companies, the report shows that they paid no taxes during the entire three-year period.

Poulsen was surprised by the figures, and some of the country's other political parties are now stating that they want an explanation from the minister in the case.

The Confederation of Danish Industry, however, said it was normal that companies had periods when they made major investments which could be deducted from their taxes.

The report shows that companies' tax payment for the years 2006-2008 fell by 17.3 billion kroner, from 50.5 billion kroner to 33.2 billion kroner.

Poulsen will now ask the Tax Ministry to look into the figures and the companies more closely.

Danish consumer price inflation increased in July, the Statistics Denmark said on Tuesday.

The consumer price index rose 2.3% year-on-year in July, faster than a 1.7% growth in the previous month. Economists were looking for an increase of 1.9%.

Food and non-alcoholic beverages prices rose 0.4% annually in July, while clothing and footwear prices fell 1.4%.Prices of alcoholic beverages and tobacco rose 9%, and housing prices rose 4%. Transportation charges grew 2.5%.

On a monthly basis, consumer prices remained unchanged in July, compared to a 0.3% fall expected by economists'.

Meanwhile, the harmonized index of consumer prices, or HICP, calculated according to the EU methodology, rose 2.1% year-on-year in July compared to a 1.7% rise in the previous month. The HICP fell 0.1% compared to the preceding month.

Industrial production in Denmark rose 4.6% year-on-year in June, Statistics Denmark said Tuesday. Month-on-month, industrial output grew a seasonally adjusted 1.2%.

In the second quarter, production grew 2.7% on a quarterly basis. Manufacture of non-durables goods increased 0.8% monthly in June and output of durables grew 2.6%. Similarly, production in intermediate industry increased 6.9%.

Meanwhile, total industrial turnover fell 1.5% monthly in June. Turnover in durables goods industry and capital goods declined.

Industrial new orders increased 23% in June from the previous month. New export orders climbed 30.5%, while there was a 1.8% fall in orders received from the domestic market.

FINLAND

In Helsinki the OMX finished the week at 6,679.94, up 0.83% on the day.

Nokia was the bestselling smartphone during the first half of the year with global sales reaching 111,473 units representing 34% of the total 325,556 handsets sold during the six-month period, according to market researcher Gartner Inc.

The Nokia operating system Symbian was also the most popular smartphone platform worldwide as the Finnish mobile phone maker sold 25,386 units equipped with the software from January to June, Gartner said.

Gartner's research find South Korean brand Samsung as the second bestselling handset with 65,328 units sold in the same period for a 20% market share. At third spot is LG with 29,366 units sold representing 9% of the smartphone market.

Research in Motion, maker of the BlackBerry, ranks fourth followed by Sony Ericsson, Motorola, Apple, HTC, ZTE and G'Five.

The second most popular platform after Symbian is RIM. A total 11,228 units sold in the first half ran on the program. At third spot is Google Inc.'s Android with 10,606 units sold running on the software. Apple Inc.'s iOS ranked fourth followed by Microsoft Windows Mobile and Linux.

Finnish building costs increased in July from the previous year, a report by the Statistics Finland showed on Thursday.

The building cost index increased 1.5% year-on-year in July, faster than a 1.1% growth in the previous month. Labour costs in construction rose by 0.3% annually and prices of materials were up 3%. Other input costs were down 1.1%.

By type of building, building costs increased 3.5% for agricultural production buildings, while those for blocks of flats were up 2.3%. Costs for building detached residential houses, office & commercial buildings, and industrial & warehouse buildings all increased.

Month-on-month, building costs grew 0.4% in July, faster than a 0.3% rise in the previous month. Prices of materials increased 0.4% and for other inputs rose 0.6%. Labour costs were up 0.2%.

Statistics Finland said on Wednesday that there were a total of 48,600 job vacancies in Finland between April and June, which was 29% more than one year earlier.

More than half the total vacancies were in private businesses. The biggest increase in vacancies was recorded in trade and professional, scientific & technical activities.

Part-time job vacancies increased 32% annually in the June quarter. Meanwhile, the share of hard-to-fill vacancies increased by 8 percentage points from a year ago to 41%.

Finland's industrial production growth continued to improve in June, official data showed Tuesday.

Industrial production increased a working day adjusted 14.5% year-on-year in June, faster than a revised 13.2% growth in May, Statistics Finland reported. The pace of growth improved for the fourth consecutive month. Industrial production has been rising since the beginning of the year.

In June, all main industries recorded growth. The biggest increase was in the forest industry, where output rose nearly 31%. The metal industry that excludes electrical and electronics industry grew by almost 26%. In the chemical industry, working day adjusted output gained 13%, while the food industry reported an output growth of 4.5%.

On seasonally adjusted basis, industrial output grew 2.1% from the previous month in June, larger than May's figure of 1.9%. It was the fourth monthly increase in a row. Apart from a downswing in February, seasonally adjusted output has been rising since October 2009, the agency said. During the January-June period, industrial output rose 7.8% from last year. Capacity utilization rate in Finnish manufacturing rose to 78% in June, up 13.8 percentage points from last year.

A latest survey by the Confederation of Finnish Industries EK had shown that Finnish manufacturing companies' business situation remained stable in July. The survey found that a steady production growth is expected for the next few months. Order books have improved, but slightly smaller than average. Meanwhile, stocks of final goods increased. Producer prices increased for the fifth consecutive month in June.

NORWAY

Oslo's OBX pulled the curtains on the trading session Friday at 326.34, down 0.08%.

Norwegian annual inflation was 1.9% in July, unchanged from June, official data showed Tuesday. At the same time, producer price inflation quickened notably in July, on the back of higher oil and non-ferrous metal prices.

In July, consumer prices rose at the slowest pace in seven months, data from Statistics Norway showed. However, economists were expecting inflation to accelerate to 2.1%. Annual core inflation rate in July was 1.3%, matching June's figure, but slightly smaller than the expected rate of 1.4%.

Prices of electricity, including grid tariff, surged 13.4% year-on-year during the month, but was countered by falling prices in food, clothing and audio-visual equipment. The price index of food and non-alcoholic beverages dropped 0.3% and that of clothing and footwear fell 4.5%. Increases in prices were also registered for fuels and lubricants as well as restaurant services.

The consumer price index, or CPI, dipped 0.5% on a monthly basis in July, mainly due to a fall in prices of clothing and footwear together with airline fares. Economists had expected only a 0.3% drop for July. In June, the index fell 0.1%.

Prices of recreational and cultural services checked the monthly decline in the consumer price index, with the prices for the whole product group rising 2.1%. This is mostly due to expanded tax liability on culture and sports area with the introduction of 8% VAT from July 1, Statistics Norway said.

Both the CPI adjusted for tax changes and the the core CPI decreased 0.6% from June to July. Data showed that EU harmonized annual inflation in Norway remained unchanged at 1.8% in July. From June, the harmonized index of consumer prices dropped 0.6%.

Norges Bank had kept the key policy rate unchanged at 2% on June 23, as recovery of the economy continued at a moderate pace and inflation moved broadly in line with projections.

Interest rate is likely to be kept unchanged for a period and further increase will occur later than previously envisaged according to Deputy Governor Jan Qvigstad as turmoil in global financial markets is creating uncertainty with regard to economic developments.

The central bank is due to publish its interest rate decision tomorrow and is widely expected to leave the policy rate unchanged. Frank Jullum, an economist at Danske Markets, said in a note Friday that low real interest rates, a relatively expansionary fiscal policy and high oil investments will, in the longer term, challenge the central bank's stance to keep interest rate spreads low.

Separately, the statistical office reported that producer price inflation accelerated to 18.1% year-on-year in July from 11.4% in June. Producer prices increased for the ninth month in a row.

The strongest price increases during these twelve months were for extraction of oil and natural gas as well as basic metals. Prices involved in oil extraction increased 35.5% and producer prices of natural gas rose 21.6%.

Increase in prices of crude oil and non-ferrous metals was the main factor behind the upturn, the statistical agency reported. An increase in oil price has caused the sharp rise in prices of refined petroleum products during this period.

Output prices in manufacturing, mining and quarrying grew 4.7%, rising from 3.7% gain in June. Electricity, gas and steam prices rose to 16.8% compared to 11.3% in June.

Prices of intermediate goods rose 6.2% annually in July, while production costs of consumer goods and energy goods increased by 2.1% and 30%, respectively. Food prices increased by 1.3% from June to July, and this was the strongest month change since November 2008, the statistical office reported.

Norway's central bank left its key interest rate unchanged at 2% for the second straight rate-setting session. In May, the bank had raised the key policy rate by 0.25 percentage point from 1.75%, the first increase since December 2009.

Recent developments in the Norwegian economy have been broadly in line with expectations, Norges Bank Governor Svein Gjedrem said. He added that activity is rising moderately and inflation has slowed and is now below 2%. Thursday, official data showed that Norwegian annual inflation was 1.9% in July, unchanged from June.

Gjedrem said considerations relating to both inflation and stable developments in output and employment imply that the interest rate should be kept low. However, the consideration of guarding against the risk of future financial imbalances that may disturb activity and inflation somewhat further ahead suggests that the interest rate should be gradually brought closer to a more normal level, he asserted.

SPAIN

The IBEX in Madrid drew to a close Friday on 10,275.80, down 0.64%.

Home sales in Spain slid 1.3% month-on-month to 37,297 in June, the National Statistics Institute said on Tuesday.

On a yearly basis, home sales jumped 7%. Around 90% of all house sales were free housing and the rest were protected housing.

The total number of property transfers decreased 3.9% from the previous year to 155,652. Property transfers were 3.6% less than the figure recorded in May.

The total number of property transfers per 100,000 inhabitants were the highest in Castilla and Leon and Castilla-La Mancha.

Separate data released by property surveyor TINSA showed that Spanish house prices dropped 4.3% from a year ago in July. This follows a 4% decrease in the previous month.

House prices in capitals and large cities declined 5% from a year earlier. Prices in the mediterranean coast were down 4.9%.

Spanish corporate bankruptcies declined 13.7% in the second quarter from the same period of last year, the statistical office INE said Monday. Quarter-on-quarter, bankruptcy dipped 9.5%.

Of the 1,511 debtors processed in the second quarter, 1,243 cases were related to companies and 77.2% of the companies declared bankrupt were Private Limited Companies. Within the total corporate bankruptcies, the share of companies with turnover less than Eur 2 million, was 63.6%.

Further, around 32% of companies declared bankrupt carried out their main activity in construction and real estate development and 20% in industry and energy.

In the second quarter, the total number of debtors processed reached 1,511, representing a 14.2% decrease from the prior year. By type of proceeding, 1,421 were voluntary, down 14.8% from prior year.

PORTUGAL

Lisbon's PSI General concluded the week Friday at 2,597.84, a dip of 0.06%.

Portugal's construction production decreased in the quarter ended in June period from the previous year, the Statistics Portugal said on Tuesday.

The construction production decreased 7.5% on an annual basis in the three months ended in June, compared to a 7.2% fall in the three months ended in May. A year earlier, the construction output slipped 5.7%.

The construction output fell 2.1% in the three months ended in June compared to the preceding three months period, following a 0.8% fall in the three months ended in May.

Meanwhile, the construction employment dropped 7.1% annually in the three months to June period and wages and salaries grew 5.7%.

Portugal's services turnover increased in June from the previous year, data from the Statistics Portugal showed on Tuesday.

The turnover in services industries grew 7.2% year-on-year in June, faster than a 6.1% growth in the previous month. Services turnover increased for the fifth consecutive month. A year earlier, services turnover slipped 13.5%.

On a monthly basis, services turnover increased 5.5% in June, following a 2.8% rise in May. Services turnover increased for the second straight month. Meanwhile, employment and wages in services declined by 0.4% and 2.0% respectively in June compared to the previous year.

In the second quarter, services turnover grew 5.1% annually in the second quarter, faster than a 1.4% growth in the first quarter.

Portuguese industrial turnover growth eased in June. The industrial turnover increased 10.5% annually in June, but slower than a 13.3% growth in the previous month.

The Portuguese consumer price index went up by 1.8% in July when compared with a year earlier, Statistics Portugal said on Wednesday. This follows a 1.2% increase in the previous month.

Excluding energy and unprocessed food, the annual rate increased to 0.6% from 0.2% in June. On a monthly basis, the consumer price index increased 0.1%.

Meanwhile, the annual harmonized inflation rate was 1.9% in July, up from 1.1% in June. This compares to a 0.9% average for the Euro area.

ITALY

Italy's benchmark FTSE MIB Index fell for a fourth day, dropping 66.25, or 0.3%, to 20,473.15 at the close in Milan.

Ansaldo STS, Finmeccanica SpA's railway- technology unit, climbed 5.5% to 9.91 Euros, snapping a six-day loss. A group led by Ansaldo won a contract worth 247 million Euros ($316 million) to provide signaling and telecommunications systems on the Sirte-to-Benghazi line in Libya. Finmeccanica (FNC IM), Italy's biggest defense company, gained 1.5% to 8.37 Euros.

Intesa Sanpaolo and UniCredit SpA (UCG IM) led declines by Italian banks. UniCredit Research downgraded European banks to "underweight," saying in a note that "the fundamental strains for banks will increase again in the second half of the year." Intesa dropped 1.3% to 2.36 Euros. UniCredit slid 1.3% to 1.98 Euros. Banca Monte dei Paschi di Siena SpA (BMPS IM) lost 0.9% to 97.5 Euro cents. Unione di Banche Italiane SCPA (UBI IM) lost 0.8% to 7.66 Euros.

Italcementi, the country's biggest cement maker, fell for a fourth day, losing 1.1% to 5.71 Euros, following declining construction stocks across Europe. Societe Generale SA said in a note that reduced 2010 and 2011 forecasts for US construction and cement consumption by the Portland Cement Association "is not a positive for heavy building material stocks, or -- to a lesser extent -- housing-exposed stocks."

Italy's 12-month inflation surged in July to 1.7% compared with 1.3% in June, pushed up by high fuel prices, the national statistics agency said Thursday, releasing definitive data.

The level is the highest since December 2008, ISTAT said in a statement.

Month-on-month inflation was 0.4%, it added. Economists had forecast 12-month inflation of 1.5% and monthly inflation of 0.1% for July, according to a poll by Dow Jones Newswires.

Fuel prices were up 10.6% compared with July 2009. Other price increases were recorded in the transport sector at 4.6%, alcoholic drinks and tobacco up 2.2%, and clothes and shoes up 1.0%.

Prices of food and non-alcoholic drinks decreased by 0.1%, and telecommunications by 1.3%, ISTAT said.

GREECE

In Athens, the Athex Composite ended both the session and the week Friday on 1,625.99, down 0.14%.

The Greek import price inflation eased for the second consecutive month in June, the statistical office said on Tuesday.

The import price index grew 6.2% year-on-year in June, slower than a 7.8% growth in the previous month. However, import prices have been rising since October last year. The statistical agency said the annual rise in the import price index reflects 1.3% increase in the import price index of the Eurozone market and 11.2% rise in non-Eurozone market.

By industrial groups, import prices of intermediate goods climbed 3.1% annually and that of capital goods dropped 0.1%. Import prices of durable consumer goods and non-durable consumer goods moved up by 1% and 0.8% respectively. Energy prices surged 23%.

On a monthly basis, import prices rose 0.6% in June, compared to a 0.5% fall in the previous month. Import prices of intermediate goods rose 0.4%, durable consumer goods prices went up by 0.2% and non-durable consumer goods prices by 0.3%. Capital goods prices were flat.

Greek industrial output declined in June, but at a slower pace compared to the same month a year ago, official data showed on Monday.

The Hellenic Statistical Authority said industrial production recorded a fall of 4.5% year-on-year in June. In June 2009, industrial output had fallen 10.3%.

Manufacturing production slid 3% annually in June, while mining & quarrying output was down 2.3%. Electricity production fell by 10.5%.

In the first six months of the year, total production contracted by 5.8% compared to the same period a year ago.

During this period, the ordinary budget revenue increased to Eur 27.9 billion from Eur 26.8 billion last year, Bank of Greece said. Ordinary budget expenditure, however, decreased to Eur 37.9 billion compared to Eur 42.7 billion in January-July period last year.

The primary balance of the state budget also declined to Eur 5.23 billion from Eur 12.3 billion a year earlier.

In July, the cash deficit or the net balance of the state budget, including movements in public debt management accounts, was Eur 3.02 billion compared to 1.8 million last year. On the other hand, primary balance of the state budget rose to Eur 240 million in July from Eur 83 million last year.

During the month, ordinary budget revenue fell to Eur 4.68 billion from Eur 5.04 billion a year earlier and ordinary expenditure was Eur 7.7 billion, up from Eur 7.14 billion last year.