European Markets Advance; ECB Interest Rate Flat

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

European markets climb after positive trade data from China. The strengthening of the euro boosts investor confidence. The ECB holds key interest rate unchanged at a record low of 1%. Centrica to acquire North American home services business for $183 million in cash.

[R]5:30 PM Frankfurt - European markets climb after positive trade data from China. The strengthening of the euro boosts investor confidence. The ECB holds key interest rate unchanged at a record low of 1%. Centrica to acquire North American home services business for $183 million in cash.[/R]

China reported a 50% surge in exports for May. In the U.S., trade deficit widened to $40.3 billion in April from a revised deficit of $40.0 billion in March, and initial jobless claims edged down to 456,000 from the previous week''s revised figure of 459,000.

In London FTSE 100 Index traded higher 4.40 or 0.09% to 5,090.26, in Paris CAC 40 Index increased 27.74 or 0.80% to close at 3,474.51, in Frankfurt DAX Index traded higher 25.81 or 0.43% to close at 6,010.56. In Zurich trading SMI Index increased 15.45 or 0.24% to close at 6,334.63.

The European Central Bank left its key interest rate unchanged at a record low of 1% for the thirteenth straight month today. The central bank also retained its interest rate on the marginal lending facility at 1.75% and that on the deposit facility at 0.25%.

At the meeting held in Frankfurt, the Governing Council, led by President Jean-Claude Trichet retained the key interest rate at 1%. The last change in the rate was in May 2009, when the bank cut the rate by 25 basis points to the current level of 1%.

ECB policymakers, including Trichet, have said that the central bank''s primary mandate remains maintaining price stability and the bond buying decision was a monetary tool aimed at normalizing markets. To date, the ECB bought bonds worth €40.5 billion.

The Bank of England today retained its key interest rate unchanged at a record-low of 0.5% and maintained its £200 billion bond purchase program.

French manufacturing production increased 0.4% in April, slower than the 1.2% gain in the preceding month, according to a report by the statistical office INSEE. A year earlier, the production decreased 0.2%.

The German government on Wednesday rejected a request by car maker General Motors for state aid to help it restructure its loss-making European subsidiary Opel.

Centrica Plc said its North American subsidiary, Direct Energy, has reached an agreement to purchase the assets of the pan-North American home services business, Clockwork Home Services Inc., for a cash consideration of $183 million or £126 million, including assumed debt.

The company stated that the acquisition of Clockwork would strengthen the scale and capability of its operations and provides an expanded geographical footprint, increasing the proportion of households served by Direct Energy where it can offer both energy services and energy supply from 30% to 55%.

This acquisition would generate synergies through lower procurement costs and leverage of Clockwork''s customer management systems, according to Centrica. The acquisition is expected to be completed in July 2010.

Gainers & Losers

Compagnie de Saint-Gobain SA rose 0.9% to €30.55 after the supplier of building materials upgraded its recommendation to “buy” from “hold” at Citigroup Inc.

Daimler AG, the carmaker rose 0.05% to €41.96.

France Telecom SA, the telecommunications operator fell 0.3% to €15.37.

Imerys SA, the industrial minerals company rose 0.1% to €40.32.

Ipsen SA, the pharmaceutical company fell 0.1% to €33.54.

Kabel Deutschland Holding AG rose 0.6% to €23.30 after the cable operator said fiscal year 2010 sales rose 7% to €1.5 billion from €1.4 billion a year ago. Net loss for the year was €45.3 million compared to net loss of €144.3 million a year ago.

Klepierre SA rose 0.2% to €22.24 after the real estate company was upgraded to “overweight” from “neutral” at HSBC.

Lafarge SA increased 0.6% to €47.07 after the cement maker upgraded its recommendation to “buy” from “hold” at Citigroup Inc.

Societe Generale SA, the bank fell 1.8% to €31.17.

Volkswagen AG, the automobile manufacturer fell 0.8% to €67.06.