Euro Area PPI Surges; BP Investigation

Arthi Gupta, Mayank Mehta and Sanjay Barot
02 Jun, 2010
New York City

European markets close lower on the growing threat of civil and criminal penalties against BP Plc. Banking stocks led the decline. Euro area producer price inflation surges 0.9% in April. Portugal Telecom announces a revised proposal from Telef

[R]5:00 PM Frankfurt; 11:00 AM New York. - European markets close lower on the growing threat of civil and criminal penalties against BP Plc. Banking stocks led the decline. Euro area producer price inflation surges 0.9% in April. Portugal Telecom announces a revised proposal from Telefónica to acquire stake in Brasilcel for €6.5 billion.[/R]

Investors continue to stay on sidelines on European fiscal woes after sovereign debt rating downgrade of Spain and weakness in the euro.

Swiss retail sales grow 1.2% in April. Spain export, import prices rise in April and the number of unemployment benefit claimants falls to record levels in May.

In London FTSE 100 Index traded lower 51.91 or 1.01% to 5,111.39, in Paris CAC 40 Index decreased 45.59 or 1.30% to close at 3,457.49, in Frankfurt DAX index lower 42.39 or 0.71% to close at 5,938.88. In Zurich trading SMI increased 6.17 or 0.10% to close at 6,322.77.

U.S. Attorney General Eric Holder threatened civil and criminal probes against BP Plc.

The firm is attempting to mount a cap to slow the oil leaking from a well in the Gulf of Mexico after its ""top-kill"" operation failed over the weekend.

In the latest operation, BP aims to lower a marine riser package containment system to siphon off oil and gas leaking from the damaged oil well in the sea floor to a container ship berthed on the sea surface.

However, chief operating officer Doug Suttles warned Tuesday that the operations does not guarantee success as it was being carried out under some ""5,000 feet of water, and very small issues take a long time to fix.""

Producer prices in the euro-zone jumped sharply in April, according to data released by Eurostat today. The producer price index rose 2.8% in April compared with the previous year. On a month-over-month basis, producer prices rose 0.9% in April, faster than the 0.6% increase in March. In the whole of the European Union, producer prices gained 1% in April compared to March. Prices increased 3.7% when compared to April 2009.

Switzerland''s retail turnover recorded a monthly growth of 1.2% in April in real terms, following a 1.3% fall in March, according to provisional results published by the Federal Statistical Office today. In nominal terms, sales grew 1.4%, reversing 0.7% decline last month.

Year-on-year, retail sales growth slowed to real 1.3% from 4% in March. Growth in nominal terms also eased in April, to 1.2% from 3.6%.

Spain’s export prices climbed 4.4% year-on-year in April, accelerating from the 3% increase in the previous month, Madrid-based National Statistics Institute said today. At the same time, import prices registered an increase of 7.8%, adding to the 7.2% increase in March.

On a monthly basis, export prices rose 1.3%, following the 0.5% increase in the previous month. Import prices were up 0.8%.

The number of people seeking unemployment benefits in Spain fell sharply in May, official figures have shown. The number of unemployment benefit claimants decreased by 76,200 in May from April, the country''s labor ministry said. Jobless claims slid by 24,200 in April.

Portugal Telecom, SGPS SA said Spain''s Telefónica SA has raised its bid to acquire PT''s 50% shareholding in Brasilcel to €6.5 billion from an earlier offer of €5.7 billion.

The offer for Brasilcel, a holding company that owns about 60% of Brazilian cellphone operator Vivo, come after the earlier offer was rejected by PT. Reportedly, Telefónica also holds a 10% stake in PT.

Telefónica''s revised bid expires June 30, but it can be extended if PT submits it to a shareholders meeting.

PT''s board, which met yesterday, said Telefónica''s revised offer does not reflect the strategic value of its asset and resolved to call a shareholders’ meeting so that PT holders can come to a decision on the offer.

In addition, the board appointed the chairman, the chief executive officer and the chief financial officer to discuss the offer with Telefónica, until the shareholders'' meeting takes place.

Telefonica SA ((TEF)) declined $1.16 or 2.02% and closed Tuesday''s regular trading session at $56.21.

French-Belgian bank Dexia SA said it would record a €69 million capital gain by selling its 6.13% stake in power producer SPE NV.

Utility group Electricite de France SA proposed to raise its stake in Belgian energy company SPE-Luminus to 63.5% from 51%.

UK insurer Prudential Plc said it is in negotiations with American International Group, Inc. for the termination of the agreement to acquire AIG''s wholly-owned Asian insurance unit, American International Assurance Co.

Gainers & Losers

BASF SE fell 1.7% to €42.30. The chemical company is constructing a new production plant for the aroma chemical L-menthol at the company''s Ludwigshafen site. The new plant is expected to come on stream in 2012. L-Menthol is another important addition to BASF''s citral value chain. The investment will create 35 new jobs in Ludwigshafen.

Bayer AG, the pharmaceutical and chemicals company declined 1.0% to €45.31.

Bouygues SA fell 1.0% to €35.12 after the building-to-broadcasting company said first quarter revenues fell 3% to €6.4 billion from €6.6 billion a year ago. Net profit for the quarter rose 14% to €181 million compared to net profit of €159 million a year ago.

Electricite de France SA, the integrated energy operator fell 0.3% to €35.83.

Eramet SA, the integrated mining and metallurgical company fell 1.8% to €216.75.

L''Oreal SA rose 0.6% to €18.80 after the cosmetics company has acquired, through its SalonCentric division, 100% of the capital of C.B. Sullivan, a New Hampshire-based company. C.B. Sullivan supplies hair salons in 6 states across the North East of the United States. The company’s net sales for the fiscal year 2009 were approximately $50 million.

Michelin SCA, the tire maker rose 0.1% to €54.55.

Neopost SA rose 1.2% to €60.55. The maker of postal equipment said first quarter sales fell 0.9% to €227.0 million from €229.2 million a year ago.

PSA Peugeot Citroen SA, the car maker declined 1.7% to €19.11.

Porsche Automobil Holding SE fell 1.5% to €34.67 after the car manufacturer was downgraded to “reduce” from “buy” at Nomura Holdings Inc.

Publicis Groupe SA fell 0.8% to €33.03. The media company has upgraded its recommendation to “buy” from “neutral.”

Zodiac SA, the aeronautical company decreased 2.0% to €39.76.