Greek Default Talks; Euro Falls

Darlington Musarurwa
27 Apr, 2010
New York City

European indexes dropped as fears of Greek default take hold. S&P lowered Greek bond ratings by three levels to junk and Portugal debt by two notches to A-. Deutsche Bank Profits Soared 48%. Daimler AG swung to a quarterly net profit on sales rise of 13%

[R]7:00 PM Frankfurt, Paris; 1:00 PM New York – European stocks fells amid concern an aid package for Greece won’t stop its deficit crisis from spreading. S&P lowered Greek bond ratings by three levels to junk and Portugal debt by two notches to A-. Deutsche Bank Profits Soared 48%. Daimler AG swung to a quarterly net profit on sales rise of 13%.[/R]

European market indexes fell sharply after fear of widening contagion enveloping Greece, Portugal, Spain, Ireland and Italy drove market sentiment.

After the close, rating agency Standard & Poor’s lowered Greek bond rating to junk level and said investors have only 30% chance of collecting principle. The rating was lowered three notches to BB+ from BBB+ and reduced Portugal debt rating by two notches to A- from A+.

Chancellor Angela Merkel said Germany will not release funds until Greece demonstrates “credible, sustainable” plan to reduce its shortfall.

National benchmark indexes fell in all 18 western European markets except Iceland. Markets in Spain, Portugal and Italy declined between 2% and 2.4%. The ASE index in Greece plunged 5% as fears of default rise. The 2-year bond yields soared to 15%.

Deutsche Bank, Germany’s largest bank, said its profit rose by a third in the first quarter of 2010, well above expectations, driven by a revival in investment banking.

Pretax profit for the three months ended March 31 was €2.8 billion, or $3.7 billion, compared with €1.8 billion a year earlier. Net profit rose to €1.8 billion, versus €1.2 billion in the first quarter of 2009.

Lazard Limited, the financial advisory and asset management firm said first quarter revenues rose 76% to $438.2 million from $248.4 million a year ago. Net loss for the quarter was $33.5 million or $0.38 per diluted share compared to net loss of €53.5 billion or $0.77 per share a year ago.

In London FTSE 100 Index closed lower 74.47 or 1.29% to 5,679.38, in Paris CAC 40 Index decreased 82.17 or 2.06% to close at 3,915.22, in Frankfurt DAX index lower 58.53 or 0.92% to close at 6,273.57. In Zurich trading SMI decreased 70.90 or 1.04% to close at 6,732.84.

Gainers & Losers

Aeroports de Paris SA fell 0.1% to €63.51 after the Paris airport operator is offering to exchange or buy back up to €750 million of outstanding bonds for new, longer-dated notes.

Air Liquide SA fell 0.06% to €89.88 after the producer of industrial gases reported first quarter revenues rose 5% to €3.15 billion from €3.0 billion a year ago.

Air Berlin Plc rose 0.5% to €4.09.

April Group SA, the Lyon-based insurance broker declined 5.7% to €25.13.

Areva SA rose 1.2% to €390.50.

Baader Bank AG fell 0.5% to €3.68 after the securities trading bank said first quarter net profit rose 81% to €3.8 million compared to net profit of €2.1 million a year ago.

Burelle SA, the maker of plastic products fell 0.4% to €123.50.

Compagnie de Saint-Gobain SA fell 1.0% to €39.26 after the supplier of building materials was upgraded to “buy” in new coverage at Jefferies.

Comdirect bank AG fell 0.8% to €8.23 after first quarter net interest income fell 26% to €24 million from €32.6 million a year ago. Net profit for the quarter rose 23.6% to €15.7 million compared to net profit of €12.7 million a year ago.

Daimler AG fell 2.0% to €38.68 after the producers of premium cars and commercial vehicles said first quarter revenues rose 13.4% to €21.2 billion from €18.7 billion a year ago. Net profit for the quarter was €612 million or €0.65 per diluted share compared to net loss of €1.3 billion or €1.40 per share a year ago.

Deutsche Bank AG fell 2.5% to €53.93 after the global investment bank said first quarter net interest income fell 4.4% to €3.67 billion from €3.84 billion a year ago. Net profit for the quarter rose 48% to €1.76 billion or €2.66 per diluted share compared to net profit of €1.19 billion or €1.92 per share a year ago.

EDF Energies Nouvelles SA added 2.8% to €35.55 after the company’s stock was upgraded to “overweight” from “neutral” at JPMorgan Chase & Co.

K+S AG added 1.1% to €44.35 after the potash producer was upgraded to “neutral” from “sell” at Goldman Sachs Group Inc.

Koninklijke KPN NV added 1.2% to €11.16 after the telecommunications company said first quarter revenues fell 3.5% to €3.27 billion from €3.4 billion a year ago. Net profit for the quarter rose 41% to €448 million or €0.28 per diluted share compared to net profit of €317 million or €0.19 per share a year ago.

Muehlbauer Holding AG & Co. KGaA fell 1.2% to €22.82 after the manufacturer of identity cards and labels with computer chips said first quarter sales fell 12% to €38.1 million from €43.2 million a year ago. Net profit for the quarter fell 68.4% to €1.8 million or €0.12 per diluted share compared to net profit of €5.7 million or €0.39 per share a year ago.

SAP AG fell 0.4% to €37.15 after the maker of business management software was upgraded to “buy” from “sell” at Merck Finck.

Software AG declined 5.9% to €89.64. The independent provider of business infrastructure software said first quarter sales rose 51.4% to €250.3 million from €165.3 million a year ago. Net profit for the quarter rose 9.4% to €28 million or €0.98 per diluted share compared to net profit of €25.6 million or €0.90 per share a year ago.

Swedbank AB first quarter net interest income fell 31% to SEK4.02 billion from SEK5.8 billion a year ago. Net profit for the quarter was SEK536 million or SEK0.46 per diluted share compared to net loss of SEK3.36 billion or SEK3.59 per share a year ago.

Total SA rose 0.3% to €42.81 after the oil refiner said that the company will cease gasoline sales to Iran if the United States passed legislation to penalize fuel suppliers exporting to Tehran.

Wirecard AG rose 0.5% to €8.55.

DAX Index Movers

MAN SE led the decliners in the DAX index of 3.35%, followed by decrease in Infineon Technologies AG of 2.95%, in Deutsche Bank AG of 2.90%, in Diamler AG of 2.66%, and in Muenchener Rue AG of 2.63%.

Merck KGaA led gainers in the DAX index with a rise of 2.39%, followed by increase in K+S AG of 0.68%, in E.ON AG of 0.25%, in RWE AG of 0.02%, and in Fresenius Medical Care AG & Co. KGaA of 0.01%.

CAC-40 Index Movers

Credit Agricole SA led the decliners in the CAC-40 index of 5.73%, in Lagardere SCA of 5.22%, in BNP Paribas SA of 4.55%, in AXA of 4.44% and in Societe Generale SA of 4.42%.

There were no gainers in the CAC-40 index.