U.S., European Indexes Soar; Large EU Stimulus

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

The indexes in Europe and U.S. rebounded sharply after the EU leaders committed $960 billion to support lending to member nations. The move designed to avert a widening crisis in the region and support the euro, managed to restore the sentiment at least for now.

[R]9:40 AM New York – The indexes in Europe and U.S. rebounded sharply after the EU leaders committed $960 billion to support lending to member nation. The mode designed to avert a widening crisis in the region and support the euro managed to restore the sentiment at least for now. The ECB also relaxed its lending to terms and the U.S. Fed reopened swap lines.[/R]

U.S. stocks and European markets rebound sharply after the EU offered a large financial package to troubled member nations and altered the way the region manages its finance.

In an emergency meeting that lasted nearly fourteen hours, the EU leaders and ministers hammered out the size of the financial package and permitted member nations to lend one another. Separately, the European Central Bank also relaxed its rules of acceptable collateral.

The International Monetary Fund also agreed to offer as much as half of the funds offered by the EU that may add up to $320 billion.

The combined move from the EU and IMF lifted trading sentiment around the world and the euro rebounded in Monday’s trading. The euro rebounded to $1.3029 after dropping as low as $1.276 on Friday.

Greek bond yields dropped sharply to 7.4%, a decline of 5 percentage points.

Size of the financial package and ECB support to lending restored confidence, at least for now. The leading indexes in Europe surged above 4% and in Asia gained more than 1.5%. Emerging markets around the world rebounded sharply. Banks led the gainers with BNP Paribas and Credit Agricole soaring more than 14% and Deutsche Bank adding more than 10%.

EU finance ministers reached agreement on a support plan for nations facing financial meltdown that will offer €440 billion in loans from euro-zone governments and €60 billion from an E.U. emergency fund, in addition to €250 billion from the International Monetary Fund.

The ECB said it will intervene in the euro zone's public and private debt markets to 'ensure depth and liquidity in those market segments which are dysfunctional.'

Meanwhile, IMF Managing Director Dominique Strauss-Kahn said the IMF was """"ready to support our European members' individual adjustment and recovery programs through the design and monitoring of economic measures as well as through financial assistance, when requested.""""

Moreover, the U.S. Federal Reserve said Sunday that it would revive an emergency lending program used during the financial crisis. The Fed offered swap lines as it has in 2008 and agreed to lend billions of dollars through foreign central banks, including the ECB to facilitate lending in home countries in dollar.

Britain, the EU’s third-largest economy, won’t contribute to a euro rescue fund, though it backs efforts to restore stability, Chancellor of the Exchequer Alistair Darling said.

Television services provider DISH Network Corp. said profit in the first quarter declined from the prior-year period as costs increased, despite a rise in revenues. DISH Network added 237,000 net new subscribers during the quarter.

Total revenue increased 5.2% to $3.06 billion from $2.90 billion for the corresponding period in 2009 and net income was $230.95 million compared to $312.68 million last year. Earnings per share were 52 cents compared to 70 cents in the same quarter a year earlier.

Commodities, Currencies and Yields

Dollar edged lower against euro to $1.2965 and increased against the Japanese yen to 93.30.

Crude oil increased $3.01 to $78.12 a barrel for a front month contract, natural gas edged higher $0.06 cent to $4.08 per mBtu and gasoline increased 6.720 cents to 219.23 cents.

Gold decreased $15.80 in New York trading to close at $1,194.60 per ounce, silver closed higher $0.044 to $18.49 per ounce and copper for the front month delivery increased 10.650 cents to $3.25 per pound.

Yields on 10-year U.S. bonds increased to 3.59% and on 30-year U.S. bonds traded at 4.43%.

Stock Movers

Altria Group, Inc., the tobacco company rose 0.3%.

BWAY Holding Company rose 0.4%. The maker of paint containers and aerosol cans reported net income of $4.4 million or 18 cents per diluted share compared to $8.7 million or 38 cents per diluted share a year ago.

Denny’s Corporation, the restaurant company rose 1.8% and Ford Motor Company, the automaker gained 6.6%.

Morgan Stanley increased 6% as financial services companies resurged in the U.S. and Europe.

Starwood Hotels & Resorts Worldwide, Inc. fell 4.5%.

Zhongpin Inc. rose 0.2% after the meat and food processing company reported first quarter profit excluding some items of 38 cents a share.

Earnings Review

General Cable Corporation ((BGC)), the maker of copper, aluminum and fiber optic wire and cable products said first quarter sales rose 5.7% to $1.1 billion from $1.04 billion a year ago. Net loss in the quarter was $7.8 million or 15 cents per diluted share compared to net loss of $27.2 million or 52 cents per share a year ago.

Watson Pharmaceuticals, Inc. ((WPI)), the specialty pharmaceutical company reported first quarter net revenues rose 28.3% to $856.5 million from $667.4 million a year ago. Net income in the quarter rose 42% to $69.8 million or 57 cents per diluted share compared to net income of $49.1 million or 43 cents per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 166.11 or 1.60% to 10,530.70, Hang Seng index in Hong Kong increased 506.35 or 2.54% to 20,426.64 and CSI 300 index in China higher 21.44 or 0.76% to 2,858.23. ASX 200 index in Australia increased 119.10 or 2.66% to 4,599.80. The FTSE Bursa KL Composite index in Malaysia closed higher 1.08 or 0.08% to 1,333.97.

The Kospi Index in South Korea increased 30.13 or 1.83% to close at 1,677.63. SET index in Thailand closed higher 10.51 or 1.37% to 779.06 and JSE Index in Indonesia increased 111.09 or 4.06% to 2,850.43. The Sensex index in India increased 561.44 or 3.35% to 17,330.55.

Europe Markets Review

In London FTSE 100 Index traded higher 273.49 or 5.34% to 5,396.51, in Paris CAC 40 Index increased 298.65 or 8.80% to 3,691.24 and in Frankfurt DAX index traded higher 279.29 or 4.89% to 5,994.38. In Zurich trading SMI increased 276.11 or 4.45% to 6,481.74.