Euro, Indexes Fall; Norsk Hydro, Vale Deal

Arthi Gupta, Mayank Mehta and Sanjay Barot
03 May, 2010
New York City

Euro-area ministers agreed to a

[R]7:00 PM Frankfurt, Paris; 1:00 PM New York –Euro-area ministers agreed to a €110 billion rescue package for Greece but investors worry of wider contagion in the region. Stocks and euro declined. Hydro acquires mine assets from Vale SA in a $4.9 billion deal.[/R]

The euro weakened and European indexes declined on the worries that financial crisis may spread even after Greece agreed to bailout terms with the EU and the IMF. Norsk Hydro ASA agreed to acquire bauxite and other assets from Brazil based Vale SA.

Investors are concerned the Greek bailout by the European Union and International Monetary Fund will fail to stem market contagion spreading to Portugal and Spain, even if it succeeds in preventing Prime Minister George Papandreou’s government from defaulting.

Prime Minister George Papandreou said Greece had reached an agreement with the International Monetary Fund and the European Union that is expected to be worth as much as €120 billion.

The bailout amounts to €45 billion this year, followed by more aid in the following two years. In return, Greece pledged to squeeze cost savings and tax increases amounting to an estimated €24 billion, or 10% of the country’s gross domestic product.

Finance Minister George Papaconstantinou said that Greece would make budget cuts of €30 billion, or $40 billion to reduce the budget deficit to less than 3% by 2014.

The first payment will be made before Greece’s next bond redemption on May 19, said Jean-Claude Juncker after chairing a meeting of euro-region finance ministers in Brussels yesterday. The 16-nation bloc will lend €80 billion at a rate of around 5% and the International Monetary Fund will contribute the rest.

The European Central Bank also relaxed its standard of collateral and said it would suspend the minimum credit rating threshold for collateral eligibility requirements for Greek sovereign debt. However, the central bank will continue to accept as collateral all new and outstanding bonds issued or guaranteed by the Greek government.

Norsk Hydro Acquires Assets from Vale

Norsk Hydro ASA, Europe’s third- largest aluminum maker, agreed to take over mine assets from Vale SA for $4.9 billion, securing a century’s worth of bauxite supplies.

Hydro will give Vale $1.1 billion in cash, a 22% stake and take on about $700 million of net debt in return for bauxite, alumina and aluminum assets, the company said yesterday. Hydro is taking control of Paragominas, the world’s third-biggest bauxite mine, and 91% of Alunorte, the largest alumina refinery, as part of the deal.

Hydro is seeking greater access to the raw materials used in aluminum production to become less reliant on mining companies supplying bauxite and alumina such as competitor Rio Tinto Group. Vale is selling aluminum assets because higher power costs are restricting its ability to expand. Electricity accounts for about a third of the cost of producing aluminum.

President Obama Says BP Responsible

BP has taken moral responsibility for the Deepwater Horizon oil rig that exploded on April 20. Bob Fryar, the company’s senior vice president for operations said that BP hopes to install a shut-off valve on one of the three leaks. That may stop some of the oil flow, Fryar said.

Fryar and Charlie Holt, BP’s drilling operations manager for the gulf, described an audacious plan to confront the blowout preventer problem. The plan will seal the well by cutting the riser at the wellhead, sliding a huge piece of equipment called the riser package out of the way and bolting a second blowout preventer atop the first one.

President Barack Obama visited affected communities on Sunday, pledging a ""relentless relief effort"" but keeping the focus on the British oil giant BP.

“Let me be clear: BP is responsible for this leak. BP will be paying the bill,"" Obama said. ""We are dealing with a massive and potentially unprecedented environmental disaster.""

""The oil that is still leaking from the well could seriously damage the economy and the environment of our Gulf States and it could extend for a long time. It could jeopardize the livelihoods of thousands of Americans who call this place home,"" Obama said during a visit to Louisiana.

The slick appeared likely to move toward the Alabama and Florida coasts and engulf the Chandeleur Islands off Louisiana's southeast tip in the next few days, the U.S. National Oceanic and Atmospheric Administration said.

National benchmark indexes rose in 11 out of 16 western European markets that were open.

In London, markets were closed today, in Paris CAC 40 Index decreased 13.77 or 0.36% to close at 3,803.22, in Frankfurt DAX index lowered 9.22 or 0.15% to close at 6,126.48. In Zurich trading SMI decreased 34.08 or 0.52% to close at 6,582.74.

Gainers & Losers

Altran Technologies SA added 3.5% to €3.78.

Auplata SA, the gold-mining and exploration company fell 1.7% to €3.35.

Boursorama fell 0.1% to €9.00.

Demag Cranes AG slipped 3.0% to €25.25 after the maker of harbor cranes was downgraded to “hold” from “buy” at Equinet.

Deutsche Boerse AG slipped 1.5% to €57.64 after the company’s shares was downgraded to “hold” from “add” at Commerzbank AG.

Eiffage SA, the civil-engineering and construction group fell 0.05% to €38.85.

Hermes International SCA climbed 2.8% to €102.40.

Icade SA, the business real-estate company dropped 0.1% to €73.24.

Ipsen SA rose 0.4% to €35.97 after the company said first quarter drug sales up 6.2% year on year at constant currency.

Naturex SA climbed 3.9% to €31.50 after the producer of natural vegetable ingredients and extracts said first quarter sales rose 88% to €51.6 million.

Renault SA, the carmaker fell 0.1% to €35.30.

ThyssenKrupp AG, the steelmaker fell 0.3% to €24.55.

TNT N.V. decreased 2.1% to €22.58. The mail and express-delivery company said first quarter sales rose 12.5% to €2.7 billion from €2.4 billion a year ago. Net profit for the quarter rose 88% to €143 million or 38.4 cents per diluted share compared to net profit of €76 million or 21.1 cents per share a year ago.

Vivendi SA fell 0.5% to €19.70.

DAX Index Movers

Bayer AG led the decliners in the DAX index of 2.10%, followed by decrease in Infineon Technologies AG of 0.77%, in Deutsche Boerse AG of 0.76%, in Siemens AG of 0.76%, and in Diamler AG of 0.13%.

Metro AG led gainers in the DAX index with a rise of 2.68%, followed by increase in Adidas AG of 2.64%, in Volkswagen AG of 2.05%, in Linde AG of 1.71%, and in RWE AG of 1.59%.

CAC-40 Index Movers

EADS NV led the decliners in the CAC-40 index of 1.39%, in Alcatel Lucent of 0.83%, in Cap Gemini SA of 0.63%, in Danone SA of 0.53% and Suez Environnement SA of 0.52%.

AXA gainers in the CAC-40 index with a rise of 2.75%, in GDF Suez SA of 2.13%, in Credit Agricole SA of 2.13% in Societe Generale SA of 1.92% and in Essilor International SA of 1.67%.