Nervous Investors Drive Euro, Indexes Lower

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

The euro touched an 18-month low on concerns that the austerity measures in the euro-zone may slow growth. EADS NV and Banca Monte dei Paschi di Siena SpA report lower profits.

[R]6:00 PM Frankfurt; 12:00 PM New York – The euro touched an 18-month low on concerns that the austerity measures in the euro-zone may slow growth. EADS NV and Banca Monte dei Paschi di Siena SpA report lower profits.[/R]

The euro touched an 18-month low on concerns that the austerity measures in the euro-zone may slow growth. European indices dropped on mounting worries that deep government spending cuts in the euro zone would stifle a fragile recovery. EADS NV first quarter net profit down 39% and Banca Monte dei Paschi di Siena SpA falls 53%.

The euro’s stability is at stake, as Greece and some European nations fight to avoid defaulting on their debts. EU leaders have voiced their deep concern over the mounting speculation over the euro and stepped up effort and joined forces to combat the bearishness and defend the euro in last weekend’s Brussels meeting.

Portugal and Spain took steps to trim their budget deficits to avoid a contagion in the euro zone.

Deutsche Bank AG Chief Executive Officer Josef Ackermann said Greece will require “incredible efforts” to repay its debts.

Greece needs to be stabilized to avoid “a form of meltdown,” Deutsche Bank’s Ackermann said in the interview aired yesterday on ZDF television and posted on the German broadcaster’s website.

“I would doubt that Greece over time will be in a position to come up with the economic potential” to pay back what it owes, Ackermann said.

Moody’s Investors Service said there is a “greater than” 80% chance it will cut its rating on Greece’s debt again as the government struggles to push through measures to reduce its budget deficit.

Former Federal Reserve Chairman Paul Volcker said he feared the euro area may breakup. He said in a speech in London yesterday “you have the great problem of a potential disintegration of the euro.”

The euro decreased 0.4% to $1.2447 from $1.2535 yesterday. Gold leaped further to hit an all time high of $1,250 an ounce.

In London FTSE 100 Index closed lower 95.69 or 1.76% to 5,338.04, in Paris CAC 40 Index decreased 87.99 or 2.36% to close at 3,643.55, in Frankfurt DAX index lower 74.09 or 1.19% to close at 6,177.88. In Zurich trading SMI decreased 75.61 or 1.15% to close at 6,499.44.

Gainers & Losers

Banca Monte dei Paschi di Siena SpA declined 2.3% to €0.92 after the bank said first quarter net interest income fell 4.3% to €886 million from €926 million a year ago. Net profit for the quarter fell 53% to €142.2 million compared to net profit of €300.6 million a year ago.

Deutsche Bank AG fell 2.5% to €49.56.

EADS NV added 1.0% to €15.72 after the aerospace group said first quarter revenues rose 6% to €9 billion from €8.5 billion a year ago. Net profit for the quarter fell 39% to €103 million or € 0.13 per diluted share compared to net profit of €170 million or €0.21 per share a year ago.

ERG SpA fell 1.6% to €10.10. The refiner said first quarter revenues rose 47% to €1.75 billion from €1.19 billion a year ago. Net profit for the quarter was €6.1 million compared to net loss of €11.3 million a year ago.

Homag Group AG, the company that manufactures machines and equipment for the woodworking industry rose 1.1% to €12.90.

Infineon Technologies AG, the chipmaker fell 1.2% to €5.11.

Iberia Lineas Aereas de Espana SA, the airline operator said first quarter revenues fell 4.5% to €1.05 billion from €1.1 billion a year ago. Net loss for the quarter was €52 million compared to net loss of €92.6 million a year ago.

Prysmian SpA closed unchanged at €12.40. The provider of high-technology cables and systems said first quarter sales rose 4.6% to €969 million from €926 million a year ago. Net profit for the quarter fell 76% to €22 million or €0.13 per diluted share compared to net profit of €90 million or €0.50 per share a year ago.

Saras SpA declined 3.0% to €1.70. The oil refiner said first quarter revenues rose 53% to €1.88 billion from €1.23 billion a year ago. Net loss for the quarter was €9.3 million or €1.00 per diluted share compared to net profit of €58.2 million or €6.28 per share a year ago.

ThyssenKrupp AG fell 0.8% to €23.50.

Unipol Gruppo Finanziario SpA dropped 2.4% to €0.71 after the insurer said first quarter net earned premium fell 18.5% to €2.2 billion from €2.7 billion a year ago. Net loss for the quarter was €7.0 million compared to net profit of €38.7 million a year ago.