Nervous Trading in Europe

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

European markets edged lower as Hungary issued contradictory statements. German factory orders increase 2.8% in April and the euro-zone investor confidence improves in June. Spain-based Grifols SA agrees to buy U.S.-based Talecris for $3.4 billion in cash and stocks.

[R]4:20 PM Frankfurt - European markets edged lower as Hungary issued contradictory statements. German factory orders increase 2.8% in April and the euro-zone investor confidence improves in June. Spain-based Grifols SA agrees to buy U.S.-based Talecris for $3.4 billion in cash and stocks.[/R]

European markets traded lower despite a rise in German factory orders. Uncertainty in the euro-zone and communication gaffes by Hungary added to investor jitters. Commodities declined after China tightened lending rules for second homes.

Hungary’s Economy Minister Gyorgy Matolcsy said today the country has targeted 3.8% budget deficit in agreement with international lenders through cuts in expenses. Matolcsy also told CNBC television that there were gaps in communication last week, but “it is blatant that Hungary is not Greece.”

European Commissioner for Economic and Monetary Affairs Olli Rehn said on Saturday the speculation of Hungary falling into default was “wildly exaggerated.” He noted that the country’s economy is on the way to recovery.

Speaking to reporters in Busan, South Korea at the G20 meetings, Rehn said Hungary has made serious progress in consolidating its public finances over past few years and the recent comparison between Hungary and Greece are “misleading.”

Euro-zone finance ministers are scheduled to meet later today in Luxembourg, as European Union President Herman Van Rompuy chairs the second meeting of the special task force formed to discuss the sovereign debt crisis.

German factory orders increased 2.8% in April from March, according to the latest data by the Federal Ministry of Economics and Technology. Domestic order growth eased to 2.9% on a monthly basis in April from 5.6% in March. External order growth slowed to 2.8% in April from 4.7% in March.

Euro-zone investor confidence improved unexpectedly in June, according to a survey published by the Sentix research group today. The investor sentiment index rose to minus 4.1 in June from minus 6.4 in May.

Spanish healthcare company Grifols SA agreed to buy Talecris Biotherapeutics Holdings Corp. for $3.4 billion, or €2.8 billion in cash and stocks. The merger between the two companies will create a leader in plasma protein therapeutics and is expected to close in the second half of 2010.

Under the agreement, Grifols, Europe''s largest blood-plasma products maker, will buy all of Talecris'' stock for $19.00 in cash and 0.641 newly-issued non-voting Grifols'' shares for each Talecris share.

The agreement has been approved unanimously by two company boards and has been recommended to their respective shareholders.

With the deal, Grifols expects to generate about $230 million in operating synergies from a more efficient plasma collection network, optimized manufacturing sales, marketing and R&D, which will be realized over the next four years with an associated one-time cost of $100 million.

In London FTSE 100 Index traded lower 14.54 or 0.28% to 5,111.46, in Paris CAC 40 Index traded decreased 6.94 or 0.20% to close at 3,448.67, in Frankfurt DAX Index traded higher 5.16 or 0.09% to close at 5,944.04. In Zurich trading SMI Index traded increased 27.82 or 0.44% to close at 6,326.79.

Gainers & Losers

CGG Veritas, the manufacturer of geophysical equipment fell 2.2% to €16.26.

Compagnie de Saint-Gobain SA fell 0.7% to €30.38. The building-materials company was upgraded to “buy” from “neutral” at Goldman Sachs Group Inc.

Daimler AG, the truck maker fell 1.2% to €39.84 and Deutsche Lufthansa AG, the aviation company declined 1.6% to €10.62.

JCDecaux SA, the outdoor advertising company fell 0.6% to €19.47 and Merck KGaA, the pharmaceutical and chemicals company decreased 1.0% to €59.17.

Roche Holding AG, the pharmaceuticals and diagnostics company fell 3.0% to €34.65 and Sequana SA, the paper manufacturing company fell 1.8% to €9.57.

Suez Environnement SA, the utility fell 1.6% to €13.82 and Total SA, the environment engineering contractor fell 0.7% to €37.90.

Veolia Environnement, the water company fell 1.6% to €20.39.

Vinci SA fell 0.3% to €36.05. The engineering contractor was upgraded to “buy” from “neutral” Goldman Sachs.