European Indexes Rally on China Comments

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

European indices rose 2% as China denied media speculation on its foreign debt holdings. Inflation in Germany increased 1.2% in May and French consumer confidence continued its downward trend in the month. Italian hourly wages increased 0.3% in April.

[R]5:00 PM Frankfurt, Paris; 11:00 PM New York. – European indices rose 2% as China denied media speculation on its foreign debt holdings. Inflation in Germany increased 1.2% in May and French consumer confidence continued its downward trend in the month. Italian hourly wages increased 0.3% in April.[/R]

European stocks consolidate as China denies report that it is reviewing euro-zone bond holdings. German inflation accelerated in May. Weakness in French consumer sentiment continues and Italian hourly wages rise in April. The euro rebounded from the depressed levels. Hochtief AG sets up joint venture in Qatar.

In London FTSE 100 Index traded higher 89.77 or 1.78% to 5,127.85, in Paris CAC 40 Index increased 66.67 or 1.96% to close at 3,475.26, in Frankfurt DAX index higher 121.59 or 2.11% to close at 5,879.61. In Zurich trading SMI increased 83.99 or 1.36% to close at 6,251.52.

The Chinese central bank on Thursday denied a report that it is reviewing its holdings of euro-zone debt, insisting that Europe remains a key market for investing the nation''s exchange reserves.

In an article citing no sources, the Financial Times reported Wednesday that representatives of China’s state foreign exchange agency have been talking with foreign bankers about reducing its exposure to bonds of Greece, Portugal, and other debt-ridden Euro zone nations.

Speculation that Greece and its profligate neighbors may default on sovereign debt has driven up borrowing costs in the euro-zone and fueled a dramatic sell-off of the euro currency.

SAFE, the State Administration of FX in China called the report ""groundless,"" noting that ""China''s foreign exchange reserve managers are responsible long-term investors and always stick to the principles of diversified investing.""

""We believe that with the joint efforts of the international community, the euro-zone will be able to overcome its difficulties and maintain the steady and healthy development of European financial markets,"" China said today.

German consumer price inflation slightly rose in May. The consumer price index increased 1.2% year-on-year in May, faster than 1% in the previous month, preliminary data from Germany''s Federal Statistical Office showed on Thursday. The annual growth was mainly due to an increase in heating oil and motor fuels prices, the Wiesbaden-based statistical office said.

French consumer confidence continued its downward trend in May to reach the lowest level in 12 months, a closely watched survey showed Thursday. Consumers'' outlook for the economy worsened amid weak spending.

Consumer confidence eased slightly to minus 38 in May from minus 37 in April, data from the statistical office INSEE showed.

Italian hourly wages increased 0.3% in April from March, data from the statistical office Istat showed Thursday. Annually, hourly wages according to collective labor agreements grew 2.4% in April, slightly up from 2.3% in March.

Syngenta AG announced that it has signed deal to buy Maribo Seed sugar beet business from Nordic Sugar, a subsidiary of Nordzucker AG, for €43 million plus €5 million contingent payments on a cash and debt free basis.

Hochtief Construction, together with the Qatari company Lusail Real Estate Development Company, a subsidiary of the state-owned real estate investor and urban developer QatariDiar, set up a joint company today.

The joint venture is to offer planning and construction services in Qatar and abroad. Its main task will be one of the biggest urban development projects in the world: The company will develop a site of approximately 35 square kilometers north of the city of Doha into a metropolis called Lusail.

The new city for about 200,000 inhabitants is planned to comprise ten districts with residential areas, shopping streets, leisure facilities, schools, medical centers and two harbors

French drug maker Sanofi-Aventis will form a capital and operational tie-up with Nichi-Iko Pharmaceutical Co. to enter the Japanese generic-drug market, the Nikkei business daily said.

Gainers & Losers

Etablissements Maurel & Prom SA, the oil explorer rose 3.4% to €9.43.

Commerzbank AG, the bank fell 0.6% to €5.72.

Compagnie Financiere Richemont SA, the luxury goods company said fiscal year 2010 revenues fell 4% to €5.2 billion from €5.4 billion a year ago. Net profit for the year fell 44% to €599 million compared to net profit of €1.08 billion a year ago.

Deutsche Bank AG, the global investment bank rose 1.8% to €47.52.

Deutsche Telekom AG, the integrated telecommunications provider fell 0.5% to €8.98.

Gecina SA, the property company rose 2.1% to €63.26.

Gesco AG fell 0.6% to €38.46 after the tool manufacturer and engineering contractor said fiscal year 2010 revenues fell 27% to €277.7 million from €378.4 million a year ago. Net profit for the year fell 59% to €8.9 million or € 2.95 per diluted share compared to net profit of €21.6 million or € 7.16 per share a year ago.

Hermes International SCA, the maker of luxury handbags and silk ties rose 2.0% to €104.25.

Hochtief AG, the global construction group rose 1.9% to €52.43.

Sanofi-Aventis, the pharmaceutical group rose 2.6% to €47.33.

Technicolor rose 3.6% to €0.526 after being upgraded to Caa1 from D by Moody’s.