Euro Tumbles; Derivatives Volatile

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

Markets in Europe fell and derivatives markets turned volatile after Germany extended ban on derivatives exposure without the collateral. The euro hit a four-year low against the dollar. EU construction rises 7.6% in March. China

[R]6:00 PM Frankfurt, Paris; 12:00 PM New York – Markets in Europe fell and derivatives markets turned volatile after Germany extended ban on derivatives exposure without the collateral. The euro hit a four-year low against the dollar. EU construction rises 7.6% in March. China’s CNPC buys stake in Shell’s Syria unit.[/R]

European indices fell as uncertainty regarding the financial stability of Europe continues to drive market sentiment. EU construction expands 7.6% in March. China’s CNPC buys stake in Shell’s Syria unit.

A unilateral German ban on short selling of euro denominated government bonds and big bank stocks is driving global equities sharply lower and fueling concerns about the long-term viability of the single currency.

The German government is set to ban ""naked"" short-selling of euro-denominated government bonds and of shares in the country''s 10 most important financial institutions.

French Economy Minister Christine Lagarde said on Wednesday France will not follow Germany in banning naked short-selling on European debt.

The euro hit a four-year low against the dollar. It fell to below $1.215 before recovering to $1.219.

The euro declined as Germany''s Federal Statistical Office announced today that the number of persons in employment dropped by 107,000 or 0.3% in the first quarter from the previous year, compared to the 0.4% fall in the previous quarter.

The number of people employed totaled 39.8 million in the first quarter, smaller than the 40.6 million in the previous quarter.

German Chancellor Angela Merkel said she will lobby governments to introduce a tax on financial markets, and for ratings companies to come under European supervision so governments regain “primacy” over markets. The euro is at risk and Europe may be facing its greatest challenge since the founding of the European Union, with “incalculable” consequences if leaders fail to act, Merkel said.

Eurostat reported that the euro zone’s construction output rose 7.6% month-over-month in March, reversing the 7.2% drop in the previous month. Annually, construction output fell 5.2%, an improvement from the 14.8% drop in the previous month.

China National Petroleum Corp., the country''s top oil producer, said Wednesday it had acquired part of a Shell subsidiary in Syria, the latest move in its global quest to secure energy resources.

The deal gives CNPC a 35% stake in Syria Shell Petroleum Development, which was wholly owned by Royal Dutch Shell, the Chinese company said in a statement.

China has been aggressively securing overseas oil production contracts as it seeks to meet soaring energy demand at home.

In London FTSE 100 Index traded lower 97.72 or 1.84% to 5,209.62, in Paris CAC 40 Index decreased 71.89 or 1.99% to close at 3,545.43, in Frankfurt DAX index lower 118.88 or 1.93% to close at 6,037.05. In Zurich trading SMI decreased 59.84 or 0.92% to close at 6,411.00.

Gainers & Losers

Accor SA, the hotelier fell 1.5% to €40.37.

Aeroports de Paris SA, the France-based airport group fell 0.8% to €57.15.

Air Liquide SA, the industrial gas company dropped 1.2% to €83.55.

Areva SA, the builder of nuclear reactors dropped 2.2% to €348.90.

BMW AG dropped 3.2% to €38.28 after the carmaker was downgraded to “underperform” from “neutral” at Bank of America Merrill Lynch.

France Telecom S.A dropped 0.9% to €15.62.

NicOx SA, the French biotechnology company added 1.4% to €2.77.

Schneider Electric SA, the maker of circuit breakers fell 1.4% to €80.87.

Telecom Italia Media S.p.A, the phone company dropped 2.7% to €0.99.

Ubisoft Entertainment SA fell 3.9% to €8.44 after the video-game maker said fiscal year 2010 revenues fell 18% to €871.0 million from €1.06 billion a year ago. Net loss for the year was €43.7 million or €0.45 per diluted share compared to net profit of €68.8 million or €0.71 per share a year ago.