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 Banking stocks led the rally in Europe after another round of data suggested that the economic recovery remains on track.
European stocks posted the biggest weekly gain this year, sending the Stoxx Europe 600 Index to its highest level in six months, as manufacturing increased globally and the US jobless rate fell to the lowest in three years.
Xstrata and Glencore International surged more than 13% after the world's largest publicly traded commodities trader held talks to buy the Zug, Switzerland-based mining company. Temenos Group rallied 20% as Misys, the British maker of software for banks, said it has held talks about a merger with the Swiss company.
The Stoxx 600 climbed 3.6% to 264.6 this week, extending the January rally of 4% that was the best start to a year since 1998. The equity gauge has gained 8.2% in 2012 and is up 23% since its 2 1/2-year low on 22 September.
The Markit Economics final purchasing managers' index, a gauge of manufacturing in the Euro area, climbed to 48.8 in January from 46.9 in the prior month. A UK manufacturing index also jumped to an eight-month high.
GERMANY
German stocks rose for a fourth day, extending a six-month high, after a report showed the US economy created more jobs in January that even the most bullish economist had predicted.
Exporters to the US, including Daimler and Bayer, led the advance. Munich Re, the world's biggest reinsurer, and Sky Deutschland also rose. Rhoen-Klinikum fell before the operator of health-care facilities reports earnings next week.
The DAX Index rose 1.7% to 6,766.67 at the close in Frankfurt as it posted a weekly advance of 3.9%. The DAX has jumped 15% this year, gaining the most in January since the benchmark measure started in 1988, amid speculation the global economy will withstand the impact of the Euro area's debt crisis and as central banks acted to fuel growth. The broader HDAX Index (HDAX) also added 1.7% Friday.
Daimler, the carmaker that makes 24% of sales in the US, climbed 3.1% to 45.46 Euros after the jobs report. Bayer, maker of the Xarelto blood thinner, advanced 1.4% to 55.09 Euros. The company generated 23% of its revenue from North America in 2010.
Munich Re gained 2.8% to 106.45 Euros. Commerzbank AG raised its recommendation on the stock to "buy" from "add," and its price forecast for the shares to 118 Euros from 100 Euros.
Sky Deutschland, the German pay-television provider controlled by News Corp., rallied 9.3% to 2.47 Euros. The stock soared 19% Thursday after the company reported higher subscriber numbers and predicted positive earnings for 2013.
Rhoen-Klinikum declined 2.8% to 15.28 Euros. Analysts at Berenberg Bank wrote in a report Friday that the company may post annual net income of 152 million Euros ($199 million) when adjusting for one-time tax gains on Feb. 9. That would be "right at the lower end of the guidance range," the brokerage wrote.
An auction of Germany's 10-year debt on Wednesday attracted strong demand and borrowing costs fell.
The country sold Eur 4.093 billion 2% January 2022 bonds in the sale, the Bundesbank said. The auction drew bids totaling Eur 5.683 billion against a target of Eur 5 billion.
The average yield was 1.82%, down from 1.93% in the previous tap on January 4. Demand was 1.4 times the offer compared to 1.3 in the previous sale.
German unemployment declined further to a two-decade low in January, suggesting that the economy is weathering the debt crisis as well as external headwinds, data from the Federal labour Agency showed Tuesday.
The number of unemployed persons decreased by 34,000 to 2.85 million in January. The decline follows a 25,000 fall in December and was larger than the expected drop of 10,000.
The jobless rate fell to a seasonally adjusted 6.7%, a new record low, from 6.8% in December. Economists had expected the rate to remain steady at 6.8%. On the other hand, the unadjusted unemployment rate rose to 7.3% from 6.6%.
According to the labour force survey by the Federal Statistical Office, unemployment decreased slightly by 20,000 to 2.34 million in December. Meanwhile, the number of persons in employment living in Germany exceeded the 41 million-mark again.
Last week, results of a survey carried out by the market research group GfK indicated an improvement in sentiment among German consumers for February. Consumption is expected to play the role of stabilizing the economy and prevent a slide into recession.
Nonetheless, data from Federal Statistical Office Friday showed an unexpected decline in German retail sales in December due to weak Christmas sales. Retail sales turnover dropped 1.4% in December after falling 1% in November. Economists had expected 0.8% growth.
On a yearly basis, retail turnover dipped 0.9%, offsetting the previous month's 0.9% rise. The consensus forecast called for an annual growth of 1.2%.
Germany's annual inflation, measured under the EU methodology, remained unchanged in January, flash estimates from the Federal Statistical Office showed Wednesday.
The annual increase in the harmonized index of consumer prices held steady at 2.3% in January. Economists were expecting it to rise to 2.4% in January.
Month-on-month, the indicator dipped 0.5% due to seasonal factors, while the expected drop for January was 0.4%.
The statistical office published HICP data separately from flash consumer prices for January. The flash consumer price inflation rate was 2% in January, down from 2.1% in December.
FRANCE
In Paris the CAC40 closed the week at 3,427.92, up a whopping 1.52% for the day.
France witnessed a decline in borrowing costs at an auction of its longer term bonds on Thursday.
The Agence France Tresor raised a total Eur 7.692 billion from the sale of bonds, known as OATs, against the target range of Eur 6.5 billion - Eur 8 billion.
The agency sold Eur 5.968 billion of a new line of 10-year bonds maturing in April 2022 against bids totaling Eur 9.730 billion. The yield was 3.13%, less than the 3.29% paid for debt of similar maturity on January 5. Demand was 1.71 times the offer, up from 1.64 in the previous sale.
The country sold Eur 1.011 billion 4.25% October 2018 bonds at an average yield of 2.44%, which is less than the 3.27% paid in the previous auction in March last year. The bid-to-cover ratio for the 6-year debt rose to 4.34 from 2.62%.
The AFT also placed 2.50% October 2020 bonds at an average yield of 2.91%, down from 3.64% in the previous tap in May last year. Demand was 3.99 times the offer, up from 3.34 in the previous sale.
Despite losing its triple A credit rating from Standard & Poor's last month, France has had successful debt auctions in recent weeks.
Activity in the French manufacturing sector declined further in January, as estimated earlier, data from a survey by Markit Economics showed Wednesday.
The seasonally adjusted purchasing managers' index (PMI) for the manufacturing sector dropped to 48.5 in January from 48.9 in December. The latest reading matched the preliminary estimates. A PMI reading below 50 indicates contraction in the sector, while one above suggests growth.
New business received by French manufacturers dropped for the seventh consecutive month, reflecting the economic uncertainty among clients. The rate of decline was faster than that in December.
With incoming orders falling sharply, French manufacturers reduced their backlogs of work in January, at the sharpest rate since October.
Employment increased for the second consecutive month, but the rate of growth was only modest.
Input price inflation at manufacturers rose for the first time in four months, while output prices rose at the slowest pace since October 2011.
French consumer spending declined unexpectedly in December, figures published by the statistical office Insee showed Tuesday. In a separate report, the statistical office said producer prices decreased in December from the prior month.
Consumer spending dropped 0.7% in December from a month ago, reversing a 0.1% rise in November. Economists were expecting spending to log a monthly growth of 0.2%.
On an annual comparison, spending decreased 3.1% after falling 2.1% in November. The expected rate of decline for December was 2.1%.
Over the fourth quarter, consumption in goods remained stable, after rising 0.2% in the third quarter.
Producer prices in the French industry was down 0.1% month-on-month, in line with economists' expectations, after rising 0.4% in November. Year-on-year, producer prices were 4.7% higher in December. The annual growth also matched economists' forecast.
In foreign markets, producer prices rose 0.1% on a monthly basis, taking the annual growth to 2.4%.
The French economy is set to grow 0.5% this year, instead of 1%, Prime Minister Francois Fillon told reporters on Monday. The revision would cost the government around Eur 5 billion.
The revision was made to take into account the deterioration of the economic situation, he added.
However, the government will not resort to new austerity measures to meet deficit targets. The deficit target for this year is 4.5% of gross domestic product.
Fillon observed that introduction of 0.1% of financial transaction tax would generate Eur 500 million in 2012. Further, measures to counter tax evasion will create another Eur 300 million.
The efforts of the government and French people as well as very cautious budget will help to built the foundation of the budget without requiring extra effort from French people, said Fillon.
BELGIUM
The Bel 20 in Brussels ended the week at 2,304.58, up 1.43%.
Belgium fell back into recession in the second half of last year, data showed on Wednesday, the first Euro zone member not subject to a bailout programme to do so.
It paved the way for what is expected to be a very difficult 2012 for the 17-member bloc, both core economies and those in the debt-ridden periphery.
Gross domestic product (GDP) in Belgium, the bloc's sixth largest economy, shrank by 0.2% in the fourth quarter, following a quarterly contraction of 0.1% in the July-Sept period.
Two consecutive quarters of contraction is generally accepted by economists as the minimum for an economy to be considered in a recession.
Belgium is often cited as a harbinger of things to come in Europe and many countries in the region are already sliding towards recession, hit by the Euro zone debt crisis and a wave of austerity required to cure it.
Economists said on Wednesday it had come as no surprise to see Belgium's recession confirmed. Indeed the 0.2% contraction was slightly better than some had expected.
Few also expect any improvement in the first three months of 2012, notably after the new Belgian government imposed austerity measures in December designed to save 11.3 billion Euros (9.3 billion pounds).
Private households in particular are downbeat, the consumer sentiment index falling to a two-and-a-half year low in January.
Economists broadly expected growth in the second quarter, the rate dependent on the health of trade partners. Belgium is among the most open economies in the world.
Year-on-year on Belgium grew 0.9% in the fourth quarter for a 1.9% total growth in 2011.
Belgium's first general strike in almost two decades brought parts of the country to a halt on Monday in an anti-austerity protest aimed at the new government and at EU leaders meeting in Brussels.
The rail network closed, buses and trams sat in depots, schools and shops shut and production stopped at the factories of many companies including carmakers Audi and Volvo, Coca Cola and imaging group Agfa-Gevaert.
Charleroi Airport, a hub for Ryanair and other low-cost carriers, was forced to cancel all flights due to union plans to block the access road.
Unions have called the general strike, Belgium's first since 1993, over government plans to raise the effective retirement age along with other measures designed to save 11.3 billion Euros.
Belgium has pledged to bring its public sector deficit below the EU limit of 3% of gross domestic product this year to avoid an EU fine and to reassure investors it has its finances under control.
The government knows growth this year will be below the 0.8% assumed for the budget drawn in December. A likely stagnation or contraction will force it to seek further savings when it revises the budget next month.
The battle lines are being drawn for that debate. The Socialists saying the rich should bear a greater burden, while the pro-business Liberals and centre-right Christian Democrats argue higher taxes would push the country into recession and government spending should be cut more.
Union leaders say they fear the government might be tempted to suspend its system of wage indexation, the linking of pay to inflation criticised by the European Commission and international economic organisations as driving up prices and undermining Belgium's competitive position.
Economists say a single skipping of an automatic pay hike could save the government at least 1 billion Euros.
For now, many Belgians appear to have accepted the need for austerity measures. According to an opinion poll in top-selling newspaper Het Laatste Nieuws last week, only 21% of Belgians supported the strike.
Union chiefs say they will decide after talks with the government over the next two weeks whether to strike again.
THE NETHERLANDS
In Amsterdam the AEX headed into the weekend on 326.33, up 1.01%.
For the Dutch, holders of the most mortgage debt as a percentage of gross domestic product, tax breaks on house payments are more than a government policy. They're a tradition under threat.
With debt levels at twice the European average, banks and politicians are applying pressure to change or abolish home-loan deductions, which have existed in the Netherlands since at least 1893. That's making buyers hesitate, freezing sales in a property market that's declined for three years, said Boele Staal, chairman of the Dutch Banking Association.
Eliminating or phasing out the deduction will make it harder for homeowners to keep up their payments and may hurt the Eur289 billion ($380 billion) Dutch residential mortgage-backed securities market, Europe's second-largest and most creditworthy, according to Standard & Poor's. The proposals come as investor demand for Dutch RMBS is climbing, narrowing spreads against benchmarks to the lowest in Europe.
So far, investors don't agree. The extra yield demanded to hold top-rated Dutch mortgage securities over benchmarks has narrowed 10 basis points this year to 155 basis points, or 1.55 percentage points, according to JPMorgan Chase. The spread has contracted from 425 basis points at the start of 2009. That compares to spreads of 610 basis points for Spanish home-loan bonds and 585 for debt tied to Italian borrowers.
Rabobank Groep's Obvion unit priced the first Dutch RMBS deal this year on Jan. 26, a 1.2 billion Euros transaction called Storm 2012-I. The deal was increased in size with a top-ranked 245 million Euros portion paying 110 basis points more than a lending benchmark.
As Europe's sovereign debt crisis roils the region, the prospect of rising unemployment and declining spending power is spurring Dutch policy makers to rein in spiraling debt.
Homebuyers can claim tax deductions on mortgage interest for 30 years, making it more affordable for them to stretch out repayment. That's also driven mortgage debt in the Netherlands to 107.1% of gross domestic product in 2010, according to the European Mortgage Federation, compared with more than 76% in the US
The Netherland's two biggest mortgage lenders, the national bank, the opposition labour Party and Christian Union parties and the biggest real-estate brokers group are pressing Prime Minister Mark Rutte's government to cut or revise the mortgage deductions as part of a broader housing plan.
Record-low interest rates from 2003 to 2005, tax breaks and competition between lenders helped fuel a Dutch mortgage boom. Banks typically offered home buyers loans for more than 4.5 times their annual salary and up to 110% of the value of the property, allowing borrowing for renovations.
As many as 15% of Dutch homeowners now owe more than the market value of their properties, said Central Bank President Klaas Knot.
"It will become a problem when you see unemployment rising and consumers may get into trouble paying interest," Knot said in an interview on Dutch television on Jan. 5. "The second problem is that the big mortgage debt distorts our banks' balance sheets."
Unemployment in the Netherlands was 4.5% in 2011, up from 3.7% in 2009 and is expected to rise to 5.25% in 2012, the country's Planning Agency said in December.
Dutch banks rely on external funding as there is a 480 billion-Euro gap between savings deposits with banks and loans to households and companies, according to the central bank. The cost of raising funds has increased amid Europe's debt crisis. Investors demand a spread of 201 basis points to hold Dutch bank debt, from 116 a year ago, according to Bank of America Merrill Lynch index data.
Central Bank President Knot has suggested changing the tax deduction so it gradually declines over the life of the mortgage. ING Groep NV, the country's second-biggest mortgage lender, has proposed phasing out mortgage deductions gradually, accompanied by lower income taxes and an end to transaction taxes on home sales.
Dutch house prices have been falling since the third quarter of 2008 after more than doubling in the decade before that. Values, which had risen since 1985, dropped 4.1% in 2011 and may fall by another 5% this year, according to the Nederlandse Vereniging van Makelaars, a group representing Dutch property brokers. That would be a 15% decline from the 2008 peak.
About 227,000 homes were up for sale in the fourth quarter, a 76% increase from the third quarter of 2008, the NVM said. About 118,000 homes were sold in all of 2011, it said. Approximately 202,000 homes were sold in 2007, data from the National Statistics Bureau showed.
Producer price inflation in the Netherlands slowed for the third month in a row in December, data released by the Central Bureau of Statistics showed Monday.
Selling prices in the Dutch manufacturing industry rose 6.1% year-on-year in December, notably slower than the 7.7% growth seen in November. The rate of growth slowed for the third consecutive month.
Output prices of goods sold in the domestic market rose at a slower pace of 5.4% annually in December than the previous month's 6.8% growth. Prices in the export market grew 6.5% year-on-year, following November's 8.3% rise.
On a monthly basis, producer prices edged down 0.1% in December, reversing the previous month's 0.3% increase. In the whole of 2011, producer prices climbed 9.9% from the previous year, the agency said.
SWITZERLAND
Zurich's SMI drew a line under the trading week at 6,153.31, up 1.47%.
Switzerland posted an all-time high trade surplus in 2011, helped by strong trade in chemicals and chemical products, the Federal Customs Administration said Thursday.
The trade balance resulted in a surplus of CHF 23.8 billion in 2011, which is 22% higher than 2010. Chemical industry was the largest contributor to the favorable outcome with a trade balance of CHF 37 billion.
In 2011, exports climbed 2.1%, slower than 7.2% surge in 2010. Imports, meanwhile, fell 0.1% after 8.6% increase in the previous month.
During the fourth quarter, the trade surplus amounted to CHF 7.22 billion, higher than CHF 5.3 billion in the previous month.
In December, exports stagnated at CHF 15.6 billion, but grew 1.6% compared to a year earlier. Imports fell 5.3% year-on-year to CHF 13.6 billion.
Separately, the Federation of Swiss Watch Industry FH said that watch exports climbed 21% year-on-year in December, taking the total value of watch exports in 2011 to CHF 19.3 billion. This was 19.2% higher than a year earlier.
Switzerland's manufacturing sector shrank again in January, survey data from the SVME Association of Purchasing and Materials Management and Credit Suisse showed Wednesday.
The Purchasing Managers' Index fell to 47.3 points from revised 49.1 in the previous month. The expected reading for January was 51.2, suggesting expectations for an expansion in the sector at the start of the year.
The current level of the PMI would even indicate a decline in industrial activity in the months to come, the report said.
The data supports the assessment that there will be only weak growth in the Swiss economy this year. GDP is forecast to rise by only 0.5% in 2012.
Switzerland's consumption indicator recovered marginally in December, data from UBS bank showed Tuesday.
The UBS consumption indicator rose to 0.92 in December from 0.78 in November. The bank said its economists are confident that the consumption indicator has bottomed out and believe it could rise over the course of the year.
As in previous months, the indicator was boosted by the continually high volume of new car registrations, which grew 7.4% year-on-year in December compared to 13.9% increase in November.
Another factor in the increase was the retail sector's performance, which, although still at -12, showed a recovery from the previous months, the bank said.
AUSTRIA
The ATX in Vienna rounded out the trading session Friday on 2,215.62, up 2.07%.
Moody's Investors Service cut the senior debt rating on nationalised lender Kommunalkredit Austria two notches on Thursday, citing rising expectations its writedowns on Greek sovereign debt will come in higher than first thought.
Moody's also cut the bank's standalone financial strength rating to E, noting expectations KA will need to write down in 2011 results the lion's share of the 204 million Euro ($269 million) exposure to Greece it had as of mid-2011.
That represented around half KA's Tier 1 capital, Moody's said, adding it could not rule out a writedown to 30% of the notional value of Greek bonds given the latest talks on involving private investors in restructuring Greek debt.
KA can use reserves to help offset the impact of writedowns and can absorb losses of up to 30 million per year on its income statement, the agency noted, expecting KA to lose more than 100 million Euros in 2011.
KA Chief Executive Alois Steinbichler said he disagreed with the downgrade, noting the bank's restructuring efforts meant operating results were in good shape and that the outcome of Greek debt talks was still unclear.
He said KA would be able to absorb any hit on Greek debt without requiring any more state assistance.
The public-sector infrastructure finance specialist booked a 31.3 million Euro writedown on its Greek sovereign debt portfolio in August, all but wiping out its first-half profit.
State-owned KA is the healthy part split off from Kommunalkredit, the lender which Austria had to nationalise in 2008 during the financial crisis. The state aims to sell off the bank by the middle of next year.
KA Finanz is the "bad bank" that emerged from the revamp. KF has said it has nearly 1 billion Euros in Greek sovereign exposure, of which around 520 million is in the form of credit default swaps or total return swaps.
Telekom Austria Group announced that new subsidiary Telekom Austria Group M2M has had a first successful quarter.
Set up in September 2011, the new division reached its targets, winning 19 projects with a total value of Eur 5 million.
These contracts have been won across the transport and logistics, industry automation and payment systems markets. The M2M division will launch a comprehensive partner programme in spring 2012 to expand the existing partner network and solutions portfolio.
Activity in the Austrian manufacturing sector increased in January after falling for four months in a row, data from a survey by Markit Economics and Bank Austria showed Monday.
The seasonally adjusted purchasing managers' index (PMI) for the manufacturing sector rose to 51.8 in January from 49 in December. A PMI reading above 50 indicates expansion in the sector, while one below suggests decline. The index moved up after remaining below the non-change mark for four consecutive months.
Production in Austrian factories increased for the first time in seven months in January, and the rate of growth was substantial. New orders received by manufactures rose for the first time in eight months. However, new export orders continued to decrease during the month, though at a weaker pace.
Firms reduced their workforces modestly in January, marking the first decline in staffing levels in four months. Input costs increased during the month, after falling in the previous month. But, the rate of inflation was well below the series average.
SWEDEN
The OMX in Stockholm completed a hectic trading week on 1,078.66, up 1.18%.
Swedish appliance maker Electrolux saw its profits plunge in the fourth quarter in an increasingly competitive market as the pressure on prices increased and the sector was hit by higher raw-material costs and weaker demand.
Electrolux reported Thursday a net profit of just 6 million Kronor ($885,000) in the fourth quarter, far below the 860 million posted in the same three-month period a year ago.
Aside from tougher market conditions, particularly in Western Europe, Electrolux also said the bottom-line figures took a hit from one-time costs amounting to 825 million kronor. These were mainly due to a number of cost-saving measures that included reviewing staff levels. Electrolux didn't specify how many workers have been, or will be, laid off.
CEO Keith McLoughlin said his company has been seeking to raise prices, lower costs and buy companies in emerging markets in order to offset the tough conditions.
The company is also continuing its strategy of developing and launching new products.
McLoughlin said "2012 will be an intensive launch year," but that it will require more investment in marketing and product development.
Swedish telecommunications firm TeliaSonera Thursday reported a decline in fourth-quarter profit, despite a small increase in revenues and margin improvement. Looking ahead, the company believes its revenues and earnings in local currencies will continue to grow in 2012 despite macroeconomic and industrial challenges, but it sees a flat margin for the year.
In the fourth quarter, net income attributable to owners of the parent decreased to 4.97 billion Swedish kronor from 5.31 billion kronor in the previous year. On a per share basis, earnings were 1.15 kronor, lower than 1.18 kronor in the year-ago quarter.
In reported currency, EBITDA increased 2.1% to 9.19 billion kronor from 9 billion kronor n the prior year. EBITDA margin was 33.9%, up from 33.5% a year earlier. EBITDA, excluding non-recurring items, increased 3.2% in local currencies and excluding acquisitions.
Non-recurring items affecting operating income totaled 308 million kronor, which included charges of about 300 million kronor related to efficiency measures, the company noted.
More than $1.2 billion of loans will be used to back private equity firm CVC's buyout of Sweden's largest supplier of tools and building materials Ahlsell, bankers said on Thursday.
It is the largest loan to back a leveraged buyout in Western Europe since global payments services business WorldPay's acquisition by Advent International and Bain Capital in 2010, and the largest buyout loan in EMEA (Europe, Middle East and Africa) since Polish telecoms firm Polkomtel in August 2011.
CVC entered exclusive talks for Ahlsell in January following an auction process and sellers Cinven and Goldman Sachs Capital Partners had been seeking some 16 billion Swedish Crowns ($2.4 billion) for the business.
CVC is now in discussions with banks including Goldman Sachs, Nordea and Deutsche Bank over a debt package which will come in at more than $1.2 billion, denominated in Euros and Swedish Crowns, or just over 4 times the company's EBITDA (earnings before, interest, tax, depreciation and amortisation).
Sweden's manufacturing sector expanded in January, contrary to economists expectations for a contraction, data from a survey by Swedbank showed Wednesday.
The purchasing managers' index (PMI) for the manufacturing sector rose to 51.4 in January from 48.9 in December. Economists were looking for a reading of 49.5. A PMI reading above 50 indicates expansion in the sector, while one below suggests decline. The sector expanded for the first time since mid last year.
New orders received by manufacturers increased markedly during the month, supported mainly by strong order growth in the domestic market.
Production in Swedish factories increased in January, though at a slower pace. Meanwhile, firms continued to reduce their workforces, amid uncertainties about the business cycle.
DENMARK
Copenhagen's OMX closed out the Friday trading session on 432.89, up 2.10%.
ATP, the €78bn Danish national pension fund, recorded its best ever financial return in 2011, despite the markets stalling in the second half of the year.
It made an overall return on assets of 26% - that amounts to Dkr125bn, or €16.8bn, it said Friday morning.
This impressive looking result was mostly due to a hedging strategy, which enabled it to keep ahead of substantial growth in its financial liabilities resulting from low interest rates. But ATP also took further risk-reducing steps in the middle of 2011, selling off assets such as equities, credit and commodities, which helped protect the fund against falling markets.
Lars Rohde, ATP's chief investment officer, told Financial News Friday: "We are currently using only a small fraction of our available 'risk budget', so we may increase our allocations to these return-seeking assets this year. But we still think we are in for a rollercoaster ride in the markets, so we will be very cautious."
Pension funds' liabilities, or the total value of all the pensions they have promised to pay, are calculated using expectations of what interest rates will be in the coming decades. These expectations are indicated through the real-time market for long-dated bonds, or prices in the related swap markets.
These markets have been dramatically affected by the ongoing Eurozone crisis. Central banks have set rates low in an attempt to stimulate growth through policies such as quantitative easing - bond-buying - and investors have flocked to government bonds considered low-risk, such as UK gilts, German bunds or indeed Danish government bonds.
As a result of all these factors, ATP said its liabilities increased by €16bn during 2011 - almost as much as its assets grew. Around €14bn of this was due to falling interest rates while another €2bn was the result of a tax bill.
ATP's hedging strategy, which aims to insulate the fund's exposure to Danish interest rates, mostly through swaps, did what it was intended to last year - though not 100% perfectly. It covered the fund against most of the liability increase, but recorded a small €1.5bn loss.
Danish pharmaceutical company Novo Nordisk reported Thursday that its fourth-quarter profits soared 19% on the back of strong sales of its key diabetes drugs Victoza, NovoRapid and Levemir.
The world's biggest insulin maker in terms of sales said net profit in the last three months of 2011 reached 4.68 billion kroner ($825 million), up from 3.95 billion kroner in the same three-month period in 2010.
Sales in the quarter rose 12% to 18.12 billion kroner ($3.2 billion) from 16.12 billion.
Net profits for the full year 2011 came in at 17.1 billion kroner ($3 billion), up 19% from 14.4 billion kroner in 2010.
In 2011, Novo Nordisk said sales of modern insulins, human insulins and protein-related products in North America rose by 9% in local currencies, of which sales in China increased by 10%.
Chief Executive Lars Rebien Soerensen described the past 12 months as having been "a very positive year," adding the Copenhagen-based group saw "significant progress for our portfolio of clinical development projects."
The company's shares rose nearly 5% to 713 kroner in Copenhagen after the release of the earnings report.
For the year ahead, it said it expects sales growth of 7 to 11%, which is about 4 percentage points higher than initially expected.
Denmark's manufacturing outlook index remained unchanged from the previous month in January, data released by Statistics Denmark showed Monday.
The seasonally adjusted manufacturing outlook index, which assesses expectations of industrial firms in the next three months, remained unchanged at 5 in January.
Meanwhile, the indicator of production outlook for the three-month period dropped to 15 in January from 18 in the previous month.
The unadjusted indicator of finished stocks held flat during the month, after recording a reading of 1 in December. The unadjusted indicator of stock of orders, meanwhile, rose to 1 from -1 in the previous month.
FINLAND
In Helsinki the OMX finished the week at 6,022.15, up 1.33%.
Outokumpu, Finland's biggest stainless-steel producer, tumbled 22%, the largest decline since 2008.
Nasdaq OMX Helsinki, home to Nokia, is pleading with companies to list their shares on Finland's main exchange and end a drought in initial public offerings that threatens to send equity investors elsewhere.
Investors are crying out for more companies to list" in Finland, Lauri Rosendahl, the president of the exchange, a unit of Nasdaq OMX Group, said in an interview at the bourse on Tuesday. "There is a capital market out there that is willing to invest in good companies."
Last year, there were "zip, zero" new companies selling shares on the Helsinki exchange and only one spinoff in 2010, in which a firm listed a part of its business separately, Rosendahl said. That compares with a total of 53 entrants during the information technology boom of 1999 and 2000. In neighboring Stockholm, there were 29 IPOs last year.
The European debt crisis "has definitely hurt listings" both in Europe and the US, Rosendahl said. The benchmark Stoxx Europe 600 Index slid 11% last year, while the Nasdaq OMX Helsinki all-share index plunged 30%. Both indexes have risen this year.
Rosendahl said companies are reluctant to list in part because of a perception that such a move brings with it stricter regulatory requirements and increased costs. Also, "there's a little bit of a culture where companies are used to growing based on the cash flow they can produce themselves," he said.
The latest listings in Helsinki include Finnish bank Aktia in September 2009 and builder SRV, which sold shares in 2007 to help fund expansion into Russia. Paint maker Tikkurila was spun off from chemicals producer Kemira in 2010.
A major revamp at Nokia that includes a deal to use Microsoft software in its smartphones will impact the earnings of the Finnish handset maker throughout most of this year, Chairman Jorma Ollila said on Wednesday.
"For a significant part of the year the transition will be seen in the results," Ollila told Finnish national broadcaster YLE.
Last week, when Nokia reported a 73% fall in fourth-quarter earnings, it said it was not able to give forecasts beyond the first quarter.
A year ago, the world's largest cellphone maker by volume unveiled a major strategy shift to Microsoft software for its smartphones in an attempt to challenge the Apple Inc iPhone and Google Inc's Android.
The sales of its new Windows Phones have so far failed to dent the dominance of Apple and Google, but Ollila said the situation would change and, as the Windows Phone is a completely new platform, the take-off will take time.
"Nokia will make it into the three, its completely obvious and the first signs are already there," he said. "None of the operating systems have taken off quickly. It will take time, as we have seen, and as was expected."
Nokia said last week it sold more than one million Windows Phones in over two months, with developers showing increasing interest. Apple sold 37 million iPhones last quarter.
Finland's manufacturing turnover increased from last year in the three months ended October, data released by Statistics Finland showed Thursday.
Turnover in the manufacturing sector rose 6.4% on an annual basis in the August-October period. Sales in the domestic market advanced 8.2% annually, while in the export market they grew 4.8%.
Turnover in the mining and quarrying industry advanced 9.6% annually, while turnover in the chemical industry climbed 17.3% during the three-month period.
There was an 8.8% growth in turnover in the food industry during the month, and a 4.6% rise in the metal industry.
German steelmaker ThyssenKrupp has agreed in principle to sell its stainless steel unit Inoxum to Finland's Outokumpu in a deal valued at 2.7 billion Euros or $3.6 billion, the Wall Street Journal reported Monday, citing a person familiar with the matter.
According to the WSJ report, ThyssenKrupp's supervisory board is expected to make a decision on the sale at a meeting Tuesday afternoon. In the meantime, both companies are said to be continuing with their efforts to convince ThyssenKrupp workers and labour union IG Metall of the potential benefits of the deal. IG Metall has been repeatedly demanding concessions from Outokumpu, including an extension of mandatory benefits.
Under the deal, Outokumpu will reportedly buy ThyssenKrupp's Inoxum unit for a cash sum and also acquire ThyssenKrupp debt that is likely to total three figures in millions of Euros. Meanwhile, ThyssenKrupp will acquire a stake of just below 30% in Outokumpu and retain that stake for at least a year.
The sale of ThyssenKrupp's Inoxum unit to Outokumpu would create the world's largest maker of stainless steel, with 18,000 employees and more than 10 billion Euros in annual revenue.
According to the WSJ report, stainless-steel smelters at ThyssenKrupp's Krefeld and Bochum plants are likely to be closed under the deal to solve teh problem of overcapacity, while the rolling capacities at the Krefeld plant would be expanded.
Last Monday, ThyssenKrupp confirmed it is in talks with Outokumpu regarding the merger of its Inoxum unit. ThyssenKrupp said that all options, including an initial public offering, a spin off or a sale to another investor, remained open for Inoxum.
NORWAY
Oslo's OBX pulled the curtains on the trading session Friday at 377.58, up 1.21%.
Norway faces hurdles in maintaining economic growth as a deteriorating global outlook hurts exports and rising household debt spurs imbalances in the housing market, the International Monetary Fund said.
The country's mainland economy, which excludes oil and shipping output, will grow 2.2% this year, after expanding an estimated 2.6% in 2011, the IMF said in an Article IV report Friday. Unemployment will stay at 3.6%, the group said.
"The challenge going forward will be to continue stable growth in the face of a difficult near-term global outlook while at the same time reducing vulnerabilities arising from long-run fiscal pressures and high levels of household debt and house prices," the Washington-based group said.
The IMF said it welcomed regulatory efforts to tighten mortgage lending to an 85% loan-to-value ratio, and also recommended the country raise minimum risk weights on mortgage loans at banks, in coordination with other Nordic countries.
House prices rose an annual 8.4% in January, according to Norway's Real Estate Brokers Association, while consumer credit growth hovers at more than 7%. The central bank estimates private debt burdens will grow to more than 204% of disposable income this year.
Norway, the world's seventh-largest oil exporter, has been shielded from the worst of the debt crisis as its crude revenue generates surpluses and unemployment remains close to 3%. The central bank in December cut its benchmark interest rate by 50 basis points to 1.75% to shield the economy from the fallout of Europe's debt crisis.
The IMF also said that it supports a "broadly neutral fiscal stance in the short term," and that current monetary policy is "appropriate."
Norway's unemployment decreased in January, while demand for labour increased, data from the Norwegian labour and Welfare Service (NAV) showed Thursday.
The number of unemployed fell by seasonally adjusted 3,400 in January. The jobless rate came in at 2.8%, in line with economists' expectations.
The number of registered unemployed totaled 71,500 in January, down 9,800 persons, or 12% from the previous year.
Sales, in terms of volume, declined a seasonally adjusted 0.3% month-on-month in December, against economists' expectations for a 0.2% growth. The figure excludes sales of motor vehicles.
Grocery trade contributed to the decline, the statistical office said. On an unadjusted basis, retail sales, excluding automobiles, grew 2.2% compared to the same month of the previous year.
The non-adjusted volume index increased 1.3% in the three-month period ended December compared to the same period in 2010.
SPAIN
The IBEX in Madrid drew to a close Friday on 8,861.20, up 1.01%.
Spain successfully sold more debt than planned at an auction on Thursday that saw declining borrowing costs.
The Spanish Treasury raised Eur 4.56 billion from the sale of government bonds known as Bonos. That exceeded the Eur 3.5 billion - Eur 4.5 billion target set for the auction.
The yield on the 4% July 2015 bond dropped to 2.861% from 3.384% in an auction last month. Demand for the 3-year debt was 1.63 times the offer, down from 1.80 in the previous sale.
The country paid 3.455% on the 2016 bond, less than the 4.021% in the previous sale last month. The bid-to-cover ratio rose to 3.57 from 3.24.
The agency placed the January 2017 bond at an average yield of 3.565%, sharply down from 5.544% in the previous auction in December. Demand was broadly unchanged at 2.7 times the offer.
Spain's unemployment increased by 177,470 in January from the prior month, data released by the labour Ministry showed Thursday. The unemployment rose by 4.01% in January to 4.6 million.
Spain has the highest jobless rate in the 17-nation currency bloc. On a seasonally adjusted terms, unemployment totaled 4.47 million, up 45,581 from December.
Unemployment in agriculture rose by 6,282 and increased by 15,105 in industry. In construction, unemployment rose 16,347 and climbed 132,581 in services. The group without previous employment grew by 7,155.
Spain's annual inflation slowed further in January, according to the flash estimate published by the statistical office INE, on Tuesday.
Inflation, as measured by the harmonized index of consumer prices (HICP), came in at 2%, down from 2.4% in December. Economists were expecting the annual rate to slow slightly to 2.3% in January.
Consumer price inflation also eased in January to 2% from 2.4% in December. The statistical office is slated to publish final data on February 15.
Eurozone inflation slowed in December to 2.7%. But it has been staying above the central bank's target of 'below, but close to 2%' since December 2010.
PORTUGAL
Lisbon's PSI General concluded the week Friday at 2,175.61, up 1.55%.
Portugal successfully raised its maximum target at an auction of its short-term debt on Wednesday at lower cost, despite increasing concerns over the country's economic outlook.
The debt agency IGCP sold Eur 1.5 billion of treasury bills in the sale, reaching the top-end of its target range of Eur 1.25 billion and Eur 1.5 billion.
The agency placed Eur 750 million treasury bills maturing on May 18 at an average yield of 4.068%, down from 4.346% in the previous sale on January 18. The bid-to-cover ratio, however, fell to 2.8 from 4.1.
The country also sold Eur 750 million of debt maturing on July 20. The yield on the paper dropped to 4.463% from 4.740% in the previous auction on January 18. Demand was 2.6 times the offer, down from 3 in the previous sale.
At the start of the week, Portuguese bond yields climbed to the highest level in Eurozone's history amid concerns that the country may follow Greece in seeking a second bailout to avoid a bankruptcy. The yield on 10-year Portuguese bonds over German Bunds exceeded 15% for the first time in the Euro era.
All the three international rating agencies have downgraded Portugal debt ratings to "junk". The economy is currently in recession and the gross domestic product shrunk 0.6% in the third quarter.
Portugal's economic confidence continued to weaken in January, data released by Statistics Portugal showed Monday.
The economic confidence index dropped to -4.7 in January from -4.4 in December. In November and October, the readings were -3.9 and -3.4 respectively. The indicator started its downward trend in October 2010.
Among components, the consumer confidence index dropped to -57.1 in January from -56.8 in the previous month. The sub-index that measures confidence among Portuguese manufacturers declined to -24.1 in January from -22 in December.
The services confidence index fell to -30.6 from -28.9, while the indicator of confidence in the trade sector edged up to -22.9 from -23, the agency said.
ITALY
The FTSE Mibtel in Milan closed the week on 16,439.60, up a round 1.00%.
The Italian manufacturing sector contracted at a slower pace in January, data from a survey by Markit Economics and ADACI showed Wednesday.
The seasonally adjusted purchasing managers' index (PMI) for the manufacturing sector rose to 46.8 in January from 44.3 in December. Economists expected the PMI to remain unchanged. A reading below 50 indicates contraction in the sector, while one above suggests growth.
New business received by manufacturing firms decreased at a slower pace in January. Reflecting the fall in new orders, production also declined during the month, though at a slower pace.
Italian manufacturers reduced their workforce at a faster pace in January, marking the sixth consecutive monthly reduction. Backlogs of decreased for the ninth month running, highlighting the excess capacity at firms operating in the manufacturing sector.
Input price inflation accelerated to the sharpest in seven months in January, owing mainly to higher transport costs and unfavorable exchange rates. Meanwhile, output prices remained almost unchanged during the month.
Unemployment rate in Italy rose modestly in December, data from the statistical office Istat showed Tuesday.
The unemployment rate advanced to 8.9% in December from 8.8% in November. Economists expected the rate to rise to 8.7% from November's originally reported 8.6%.
The rate was 0.8 percentage point higher than the same month of the previous year. Unemployment rate among youth, on the other hand, declined 0.2 percentage points from a month earlier to 31%.
The number of unemployed rose 0.9% on a monthly basis to 2.243 million. On an annual basis, there was an increase of 10.9% in the number of unemployed.
The employment rate remained steady at 56.9% in December. During the month, there was a 0.1% decrease in the number of employed persons. Compared to November, the number of employed persons remained unchanged.
Italy raised Eur 7.5 billion from bond issue on Monday, close to the maximum target set for the auction.
The Treasury sold maximum Eur 2 billion benchmark 10-year bonds, with the demand exceeded the offer by 1.42 times. The yield on the issue eased to 6.08% from 6.98% logged on December 29.
The Treasury also sold Eur 3.57 billion 5-year bonds at a gross yield of 5.39% compared to 6.47% at the prior auction of similar securities. The demand exceeded the offer by 1.3 times.
It also raised Eur 746 million from the issue of bonds due on April 2016 and Eur 1.16 billion in bonds maturing on March 2021. The bid-to-cover ratio on bonds maturing in 2016 was 1.87 and that on bonds due in 2021 came in at 1.5.
This was the first issue after Fitch Ratings downgraded Italy's bond ratings to 'A-' from 'A+' last Friday.
EU leaders and finance ministers are set to meet in Brussels Friday. The informal meeting will discuss the steps to be taken by the EU in order to overcome the current debt crisis and tackle its consequences.
GREECE
In Athens, the Athex Composite ended both the session and the week on 762.15, down 3.82% on the session.
Most Greek chief executives are reviewing their companies' strategies and almost half see further job cuts this year, PricewaterhouseCoopers LLP said.
Ninety% of CEOs are reviewing their strategy and 54% made job cuts in the past 12 months, according to an e- mailed statement from PwC's Greek unit, which interviewed 45 Greek company chiefs between September and December as part of a global survey. Forty-one% expect more cuts in workforce this year.
Both the figures for job cuts in the past 12 months and expected future cuts were the highest for any country in the Euro region, PwC said. Eighty-two% of CEOs said they were unhappy with their tax burden in Greece and cited that as a reason for turning to overseas markets.
Ninety-three% of CEOs interviewed said they lacked confidence in the government's policies for handling the economic crisis, compared with 85% in the year-earlier survey.
Vodafone and Wind Hellas have agreed to merge Wind with Vodafone's Greek subsidiary, with an announcement likely by 9 February.
Vodafone shareholders will hold a 60% stake in the combined operator, while Wind's shareholders will own the remaining 40%.
Vodafone group owns 99.878% of Vodafone Greece. Wind Hellas is not connected with Wind in Italy or elsewhere - as the then heavily indebted Greek operation was restructured in October 2010 and taken over by new owners.
Senior secured bondholders, including a unit of Providence Equity and distressed debt funds Mount Kellet Capital, Angelo Gordon and Anchorage Advisors, took 100% of the company's shares in return for agreeing to wipe out €1.2 billion of debt.
The head of Greece's state-controlled horseracing company was arrested Wednesday on charges that the corporation withheld taxes and owed debts of €83 million ($109 million) to the state, officials said.
The detention of Alexandros Zaharis, head of Horseracing Organization of Greece SA., or ODIE, is the latest of several arrests for debts to the state in the near-bankrupt country. But it is the first involving an official from a company in the broader state sector.
A police official confirmed Zaharis' arrest on condition of anonymity in line with police rules.
Police say ODIE failed to pay the state some €277,000 ($365,000) in withheld taxes on profits and a further €741,000 ($976,000) in other dues between January and May 2011, in addition to the €83 million debt.
The criminal charges, if proved in court, carry a minimum five-year prison sentence.
Beset by flagging revenues, rampant tax evasion and an inefficient tax collection system, the government has toughened tax fraud laws and cracked down on debtors, naming more than 4,000 individuals from the private sector who allegedly owe up to €1 billion ($1.3 billion) in taxes.
In the second half of December alone, 492 arrest warrants were issued over debts to the state and tax evasion, the financial prosecutor's office said Wednesday.
A list of corporate debtors was topped by the state railways and included several public sector entities.
Total outstanding debts to the state reach an estimated €60 billion ($78 billion) - little more than a tenth of which is seen as collectible.
ODIE, which is fully state-owned, is due for privatization this year under the government's ambitious plans to sell or lease €50 billion ($66 billion) worth of state assets by 2015.
The privatizations are part of a program of harsh austerity and sweeping market and public sector reforms pledged in return for the international rescue loans that are keeping Greece solvent.
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