Nervous Europe Faces Greek Worries

Mayank Mehta
08 Apr, 2010
New York City

On going Greek default worries occupied investors in European trading. European Central Bank left its key lending rate at 1% and President Trichet asserted that Greece is not likely to default. After the close Greece said first quarter deficit plunged 40%.

[R]7:00 PM Frankfurt, Paris; 1:00 PM New York – On going Greek default worries occupied investors in European trading. European Central Bank left its key lending rate at 1% and President Trichet asserted that Greece is not likely to default. After the close Greece said first quarter deficit plunged 40%.[/R]

The Greek 10-year bonds yields increased 18 basis points to 7.35% as more investors speculated that the EU led bailout may unravel.

The European Central Bank left its key lending rate at 1%. The ECB President Jean-Claude Trichet stressed again today Greece is not likely to default.

Trichet said to reporters in Frankfurt after the rate decision, “Taking all the information I have, a default is not issue for Greece.”

Trichet also confirmed that minimum collateral that the central bank is read accept will not revert from BBB- rated to A- at least till next year. The move is designed primarily to help Greece in case the sovereign debt rating is lowered.

Greece’s debt is rated A2 by Moody’s which five notches higher that the ECB requirement for the collateral and BBB+ by the Standard & Poor’s which is three levels higher.

The euro was unchanged after the rate decision.

Greece reported after the market close that its first quarter budget deficit plunged 40% to 4.3 billion euros from 7.1 billion euros a year ago period.

Finance Minister Geroge Papaconstantinou said in a statement that the current declined was achieved before the latest measures to cut spending and increase revenues have “fully taken effect.”

European retail trade sales in February decreased 0.6% compared to January in the euro area and in the wider zone of 27 nations. Compared with February 2009 retail sales index decline 1.1% in the euro area and 0.7% in the EU27.

UK production output in February fell by 0.1% from a year ago. Output in mining declined 7.6%, energy fell 2.6%. Manufacturing output increased 1.0% in February from a year ago month.

In London FTSE 100 Index closed lower 51.33 or 0.89% to 5,710.73, in Paris CAC 40 Index decreased 48.78 or 1.21% to close at 3,978.19, in Frankfurt DAX index lower 53.12 or 0.85% to close at 6,169.29. In Zurich trading SMI decreased 47.19 or 0.69% to close at 6,796.30.

Gainers & Losers

Bernard Loiseau SA closed unchanged at €6.14 after the food and restaurant group announced that it has decided not to distribute dividend for the fiscal year 2009.

Deutsche Bank AG the lender fell 2.8% to €55.65.

Etablissements Maurel et Prom SA decreased 3.1% to €12.23 an oil company said 2009 revenues rose 97% to €183.0 million from €93 million a year ago. Net loss for the year was €50.7 million or €0.44 per diluted share compared to net profit of €62.5 million or €0.55 per share a year ago.

H & M Hennes & Mauritz AB the retailer said first quarter revenues rose 7% to SEK24.85 billion from SEK23.3 billion a year ago. Net profit for the quarter rose 45% to SEK3.74 billion or SEK4.52 per diluted share compared to net profit of SEK2.58 million or SEK3.11 per share a year ago.

JCDecaux SA fell 0.4% to €21.15 after the seller of outdoor advertising announced that it has been awarded the street furniture and self-service bicycle contract for Valencia, Spain.

Klepierre SA slipped 0.8% to €29.20 after the shopping-center owner priced its €700 million seven-year bond at 125 basis points over mid-swaps.

Qiagen NV rose 2.3% to €17.65 and the biotechnology company was upgraded to “buy” from “hold” at Commerzbank.

Sanofi-Aventis fell 0.4% to €55.08 after the drugmaker has priced its €500 million April 2014 bond at 20 basis points over mid swaps.

SAP AG fell 1.2% to €35.55 after the company was downgraded the stock to “sell” from “reduce” at AlphaValue.

Salzgitter AG the steel maker fell 1.3% to €69.62 and ThyssenKrupp AG slipped 2.1% to €26.14.

Scor SE fell 1.7% to €18.41.

Viel et Compagnie SA the brokerage dropped 0.6% to €3.13.

DAX Index Movers

K+S AG led the decliners in the DAX index of 2.64%, followed by Volkswagen AG of 2.24%, in Infineon Technologies AG of 2.16, in Allianz SE of 2.05%, and in Commerzbank AG of 1.95%.

Fresenius Medical Care AG & Co. KGaA led gainers in the DAX index with a rise of 0.27%, followed by increase in Merck KGaA of 0.20%, in Bayer AG of 0.13%.

CAC-40 Index Movers

Dexia SA led the decliners in the CAC-40 index of 3.35%, in Societe Generale SA of 3.14%, in EADS NV of 3.00%, in ArcelorMittal of 2.55% and in Credit Agricole SA of 2.52%.

Lagardere SCA gainers in the CAC-40 index with a rise of 0.05%.