European Markets Focus on Earnings, Spain

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

European indexes gained on positive earnings from Deutsche Telekom, Allianz, ING, Natixis and Aegon. Euro-area GDP increased 0.2% in the quarter to March industrial output gained 1.3% in the month. Spain announced austerity measures to trim government spending.

[R]7:00 PM Frankfurt, Paris; 1:00 PM New York – European indexes gained on positive earnings from Deutsche Telekom, Allianz, ING, Natixis and Aegon. Euro-area GDP increased 0.2% in the quarter to March industrial output gained 1.3% in the month. Spain announced austerity measures to trim government spending.[/R]

European indexes rose on positive earnings momentum and Spain''s plan to drastically cut its deficit providing support.

Spain said it would take immediate austerity measures, further easing jitters over euro-zone sovereign debt woes. The euro strengthened and European shares rose following the announcement.

Spain''s Prime Minister Jose Luis Rodriguez Zapatero said Madrid would slash civil service pay by 5% this year, freeze it in 2011 and cut 13,000 public sector jobs this year in a drive to meet European Union deficit target.

The announcement came two days after euro zone governments, the European Central Bank and the IMF agreed on a $1 trillion rescue package to stabilize the euro in exchange for pledges from highly indebted European countries to cut their deficits.

In a drive to tighten fiscal discipline and prevent a re-run of Greece''s fraudulent statistics and ballooning deficit, EU Economic and Monetary Affairs Commissioner Olli Rehn unveiled proposals for greater budget coordination on Wednesday.

The key plank would be for governments to submit their draft budgets to Brussels for scrutiny and peer review by other member states before they are adopted by national parliaments.

Rehn said this would enable the Commission and the European Parliament to ""identify economic challenges for the EU and the euro zone"" at an earlier stage and recommend changes.

The Commission also proposed a stricter use of existing sanctions, including a cut-off of EU funds to countries that violated the bloc''s budget rules.

National benchmark indexes gained in all of the 18 western European markets. Spain’s IBEX 35 rose 0.7%.

David Cameron is Britain''s new Prime Minister. Prime Minister-designate David Cameron has named Liberal Democrat leader Nick Clegg as Deputy Premier in Britain''s new government, first coalition government since 1945.


David Cameroon said that he aims to form a ""proper and full"" coalition government with the Liberal Democrats. He acknowledged that Britain has ""some deep and pressing problems - a huge deficit, deep social problems, a political system in need of reform.”

The coalition must cut a budget deficit running at more than 11% of GDP which was welcomed by the Bank of England governor Mervyn King.

First quarter gross domestic product in the euro area and wider zone of 27 nations increased 0.2% compared to previous quarter. Seasonally adjusted GDP compared to the quarter a year ago increased 0.5% in the euro area and 0.3% in the EU27 in the first quarter of 2010.

Industrial output in 16-nations euro zone increased by 1.3% in March from previous month and rose by 6.9% from a year ago.

Deutsche Telekom AG reported a profit for the first quarter compared to a loss last year, as growth in emerging economies continued during the quarter. Meanwhile, the group''s U.S. wireless operation, T-Mobile USA, reported an increase in net income, but witnessed a drop in customers due to intense competitive environment and an industry-wide downturn.

Dutch financial services company ING Groep NV reported a profit for the first quarter compared to a loss last year, as market conditions improved and volume growth remained healthy in both banking and insurance operations. The company recorded lower loan loss provisions in the quarter and the results were helped by a hefty gain. However, the bank issued a cautious outlook.

In London FTSE 100 Index closed higher 29.69 or 0.56% to 5,363.90, in Paris CAC 40 Index increased 35.49 or 0.96% to close at 3,728.69, in Frankfurt DAX index higher 120.86 or 2.00% to close at 6,158.57. In Zurich trading SMI increased 68.64 or 1.05% to close at 6,577.64.

Gainers & Losers

AEGON N.V decreased 1.6% to €5.12. The provider of life insurance, pensions and asset management said first quarter revenues rose 1% to €8.7 billion from €8.6 billion a year ago. Net profit for the quarter was €371 million or €0.19 per diluted share compared to net loss of €173 million or €0.15 per share a year ago.

Allianz SE rose 2.2% to €84.08 after the integrated financial services provider said first quarter revenues rose 10.3% to €30.6 billion from €27.7 billion a year ago. Net profit for the quarter rose 5,245% to €1.55 billion or €3.43 per diluted share compared to net profit of €29 million or €0.04 per share a year ago.

Banca Popolare di Milano Scarl fell 3.0% to €3.85 after the bank said first quarter net interest income fell 25.4% to €179.8 million from €241 million a year ago. Net profit for the quarter fell 30% to €50.1 million or €0.09 per diluted share compared to net profit of €71.7 million or €0.17 per share a year ago.

Bayer AG, the drugmaker rose 0.3% to €47.60.

Corio N.V fell 0.2% to €41.15. The property investment company said first quarter net rental income rose 2% to €84.5 million from €82.8 million a year ago. Net profit for the quarter was €43.2 million compared to net loss of €105.1 million a year ago.

Deutsche Telekom AG added 1.7% to €8.97. The integrated telecommunications provider said first quarter revenues fell 0.6% to €15.8 billion from €15.9 billion a year ago. Net loss for the quarter was €767 million or €0.18 per diluted share compared to net profit of €1.12 billion or €0.26 per share a year ago.

Deutsche Postbank AG rose 0.3% to €24.50 after the financial services provider said first quarter net interest income rose 6% to €675 million from €637 million a year ago. Net profit for the quarter fell 2% to €96 million compared to net profit of €98 million a year ago.

ING Groep N.V rose 0.8% to €8.59. The global financial institution said first quarter gross premium income fell 6% to €8.3 billion from €8.8 billion a year ago. Net profit for the quarter was €1.33 billion compared to net loss of €793 million a year ago.

Lottomatica Group fell 1.2% to €13.29 after the lottery operator said first quarter revenues fell 6.5% to €544.6 million from €582.2 million a year ago. Net profit for the quarter fell 59% to €29.4 million or €0.18 per diluted share compared to net profit of €71.9 million or €0.48 per share a year ago.

MAN SE, the truckmaker rose 0.7% to €68.47.

Mediaset SpA fell 0.6% to €5.64. The commercial television group said first quarter revenues rose 17.5% to €1.12 billion from €952.4 million a year ago. Net profit for the quarter rose 55% to €92.9 million compared to net profit of €60.0 million a year ago.

Natixis SA advanced 2.6% to €3.85 after the investment bank said first quarter net banking income rose 23% to €1.6 billion from €1.3 billion a year ago. Net profit for the quarter was €464 million compared to net loss of €1.78 billion a year ago.

Rexel SA dropped 2.4% to €12.00 after the electrical equipment supplier said first quarter revenues fell 4% to €2.7 billion from €2.8 billion a year ago. Net profit for the quarter rose 3,144% to €29.2 million compared to net profit of €0.9 million a year ago.

RWE AG rose 1.7% to €60.79 after the supplier of electricity and gas said first quarter revenues rose 5.5% to €15.3 billion from €14.5 billion a year ago. Net profit for the quarter fell 11% to €1.56 billion or €2.92 per diluted share compared to net profit of €1.75 billion or €3.28 per share a year ago.

Sky Deutschland AG fell 2.0% to €1.47. The cable network provider said first quarter revenues rose 1% to €234.7 million from €232.7 million a year ago. Net loss for the quarter was €97 million or €0.18 per diluted share compared to net loss of €79.7 million or €0.66 per share a year ago.

Television Francaise 1 SA rose 0.1% to €13.29 after the broadcaster said first quarter revenues rose 11% to €597 million from €538 million a year ago. Net profit for the quarter rose 409% to €32.6 million or €0.15 per diluted share compared to net profit of €6.4 million or €0.03 per share a year ago.

ThyssenKrupp AG added 1.1% to €24.07. The steel producer said first half revenues fell 9% to €19.5 billion from €21.4 billion a year ago. Net profit for the first half was €370 million or €0.80 per diluted share compared to net loss of €161 million or €0.35 per share a year ago.

UniCredit SpA advanced 2.8% to €2.00. The bank said first quarter net interest income fell 15% to €3.98 billion from €4.70 billion a year ago. Net profit for the quarter rose 16% to €520 million or compared to net profit of €447 million a year ago.

Vivendi SA climbed 2.0% to €18.28 after the communications and entertainment company said first quarter revenues rose 6% to €6.9 billion from €6.5 billion a year ago. Net profit for the quarter rose 21% to €598 million or €0.48 per diluted share compared to net profit of €493 million or €0.42 per share a year ago.

Wereldhave NV fell 0.2% to €60.94. The property investment company said first quarter revenues rose 0.7% to €54 million from €53.6 million a year ago. Net profit for the quarter was €12.6 million or €0.50 per diluted share compared to net loss of €1.47 million or €0.16 per share a year ago.