European Market 8-Day Streak Continues

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

European markets continue to rise after eight sessions of straight gains. German producer prices rise 0.3% in May. Spanish bank Banco Santander

[R]5:30 PM Frankfurt - European markets continue to rise after eight sessions of straight gains. German producer prices rise 0.3% in May. Spanish bank Banco Santander’s UK affiliate bids for about 300 RBS branches.[/R]

European Central Bank Governing Council member Axel Weber says permanent support for indebted countries must be avoided.

In London FTSE 100 Index traded higher 11.48 or 0.22% to 5,265.37, in Paris CAC 40 Index decreased 14.23 or 0.39% to close at 3,668.85, in Frankfurt DAX Index traded lower 8.67 or 0.14% to close at 6,214.87. In Zurich trading SMI Index decreased 27.64 or 0.43% to close at 6,447.61.

Spain sold €3 billion of 10-year bonds at a yield of 4.864%, and €480 million of 30-year bonds at 5.908%. Spain faces debt repayments worth around €25 billion in July, and fears over its ability to cover the redemptions rose after borrowing costs reached record levels this week.

On Wednesday, the interest rate the Spanish government was bonds yields stood 2.23 percentage points above that demanded from Germany. A higher gap means investors consider Spanish debt to be a riskier investment.

The European Commission, the European Central Bank and the International Monetary Fund said on Thursday that Greece''s economic program to cut its budget deficit is on track and the country''s government is implementing policies as agreed.

European Union leaders have agreed to make public the results of bank stress tests to restore some investor confidence in the area. European Commission President Jose Manuel Barroso said the tests would be released on a bank-by-bank basis.

""This should reassure investors by either lifting unfounded suspicion or by dealing with the remaining problems they may exist,"" European Commission President Jose Manuel Barroso said in a press conference following a key summit in Brussels.

Germany''s producer prices increased for the second consecutive month in May, according to a report by the Federal Statistical Office released today.

The producer price index, or PPI, rose 0.9% year-on-year in May, faster than the 0.6% growth in the previous month.

Energy prices dropped 1.1% on an annual basis in May, while prices of oil products climbed 22.3%.

On a monthly basis, the PPI rose 0.3% in May, slower than 0.8% in April. Producer prices increased for the third successive month.

Europe should avoid permanent support for debt-laden countries and needs to boost efforts to strengthen fiscal positions of individual states, European Central Bank Governing Council member Axel Weber said on Thursday.

In a speech in Frankfurt, Weber said the actions taken so far to support those countries with higher debts are justifiable, but those measures should not become the basis for a permanent, pre-financed support system.

Weber, who heads Germany''s central bank, suggested an increase in incentives for governments to maintain solid fiscal policies together with the strengthening of the Stability and Growth pact.

European Central Bank President Jean-Claude Trichet said today the bank has not moved towards more ample liquidity conditions and the decision to buy government bonds is not part of any monetary policy easing.

""Like all the other non-standard measures that we have taken, the Securities Markets Program is time-bound in nature,"" Trichet said in a speech in Moscow. He noted that the move was aimed at ensuring the proper transmission of monetary policy impulses to the wider economy and, ultimately, to the general price level.

Spanish bank Banco Santander S.A. announced today that its affiliate Santander UK has submitted an offer in the tender process of nearly 300 branches of Royal Bank of Scotland Group Plc.

With the acquisition of banking and financial services providers Alliance & Leicester, Bradford & Bingley, and Abbey National in the recent years, Santander already has a substantial presence on UK High Street.

RBS, 83% state-owned after it was bailed out in the financial crisis, is reportedly selling off the branches under Williams & Glyn brand.

RBS is selling the outlets to comply with a European Union ruling after it received over £45.5 billion, or about $66 billion, in government aid during the credit crunch.

Banco Santander S.A. rose 12.50 pence or 1.66% and is currently trading on the London Stock Exchange at 766.50 pence per share on a volume of 44,688 shares. In the past 52-week period, the stock traded in a range of 599.00 pence to 1,098.00 pence.

Royal Bank of Scotland Group Plc ((RBS)) fell 0.18 pence or 0.39% and is currently trading on the LSE at 46.52 pence per share on a volume of 61.76 million shares. In the past 52-week period, the stock traded in a range of 28.25 pence to 58.95 pence.

Gainers & Losers

Bayerische Motoren Werke AG, the automobile manufacturer rose 2.1% to €40.51.

Deutsche Lufthansa AG, the aviation company rose 0.4% to €11.62.

Ipsen SA, the pharmaceutical company plunged 15.6% to €26.98.

Porsche Automobil Holding SE rose 2.5% to €35.48 after the car manufacturer said nine months sales rose 11.8% to €5.2 billion. Net loss for the nine months was about €0.7 billion compared to net profit of €4.2 billion a year ago.

Salzgitter AG rose 0.8% to €51.97 after the steelmaker was upgraded to “hold” from “sell’ at UniCredit SpA.

STADA Arzneimittel AG rose 0.4% to €29.73 after the pharmaceutical company was upgraded to “underweight” in new coverage at Morgan Stanley.