Bonds of European government increased as there was a decline in the stock markets that encouraged investor’s claiming for the safest resources. As the equity losses from Asia spread to European markets, bonds inverted an earlier drop by pushing the world index of MSCI down to 0.9%, on the anxiety of expanding credit market losses to push the largest economy into decline. The stock indices of United States also dropped. The possibility of companies failing to pay on their debts mounted on rumor bond monoclines insurers that it would not be able to avoid ratings being reduced which would preferably hurt their businesses.

The leader of fixed income plan in London, David Keeble said that the twist in bond rates has been an effect of spontaneous news flow in union with the monocline insurers. The fixed income plan in London is the unit of investment banking of Credit Agricole SA which is the second biggest bank in France. Germany’s two year memorandum dropped to 7 points which was by 3.32 % and the rate of the 4% security which is due in December 2009 increased up to 1.2 euros per 1,000 euros with the face amount of 101.18.

Germany’s debts remained higher even after several reports proved that service industries in Europe without prior notice developed at the weakest pace in more than four years in the month of December. Retail sales even dropped extremely in at least the gap of 13 years in the last month. Usually the market readings of above 50 signify development in the business. Taking this in account, the service index of the Royal Bank of Scotland dropped to the lowest since July’03 which was 53.1 in December to 50.6 at present. The statistics office of European Union in Luxemburg said that the retail sales in the European markets dropped to 2 % in the year which was the highest drop since January’95. The Bloomberg News economists surveyed and calculated a drop of 0.8 %.

European stocks even followed the lower equities of Asia with the index of Dow Jones Stoxx 600 slipped to 1.1 % as the stocks average of Japanese Nikkei 225 declined to 0.8 %. One survey of economists suggest that the European Central bank would likely maintain the interest rates at the higher level of six year during this week as it reviews stronger inflation to be one of the main concerns for slowing the economic growth of the country.

According to the 55 economists in the survey of Bloomberg, the Frankfurt based European Central Bank would maintain its refinancing interest rates at 4 % on the 7th of February. The oblique rate on the Euribor prospects agreement for the month of December was at 3.57 % from 4.09 % one month before which signaled at least two cuts on interest rates by the European Central bank during this year. Bunds dropped as the recent reports showed that European inflations stepped up in December to the highest rate in the year that boosted by rising and falling of energy prices.

Tags: European Stocks & Shares News, European Economy News //