European Markets Slide

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

European stocks stumble after new home sales in the U.S. slumped 33% in May. Euro-zone composite PMI falls to three-month low in June. BASF agrees to buy Cognis in $3.8 billion deal.

[R]4:30 PM Frankfurt - European stocks stumble after new home sales in the U.S. slumped 33% in May. Euro-zone composite PMI falls to three-month low in June. BASF agrees to buy Cognis in $3.8 billion deal.[/R]

French manufacturers'' sentiment weakened to 95 and manufacturing activity increased at a slower pace in June. German consumer morale set to stabilize in July according to a monthly survey from GfK Group.

In London FTSE 100 Index traded lower 10.64 or 0.20% to 5,236.34, in Paris CAC 40 Index decreased 20.02 or 0.54% to close at 3,685.30, in Frankfurt DAX Index traded lower 9.23 or 0.15% to close at 6,259.81. In Zurich trading SMI Index decreased 24.26 or 0.38% to close at 6,439.20.

Euro-zone private sector activity dropped from April''s post-recession high, according to data released from Markit Economics today. The flash composite output index stood at a 3-month low of 56 in June, down from 56.4 last month.

The flash Purchasing Managers'' Index for the manufacturing sector dropped to 55.6 in June from 55.8 in May. The services PMI dipped to 55.4 from 56.2 in the prior month.

French manufacturing activity increased at a slower pace in June. The Purchasing Managers Index for manufacturing dropped to a four-month low of 54.9 in June from 55.8 in May, according to data from Markit Economics released today.

The manufacturing output index slipped to 57 in June from 57.1 in the preceding month.

French manufacturing confidence eased slightly in June, a key monthly survey suggested.

The French manufacturers'' sentiment fell to 95 in June from May''s 97 according to reports from the statistical office INSEE. Manufacturers'' personal production outlook indicator slumped to -7 from 3. Meanwhile, the general production indicator, which is a gauge of general industrial activity in France, edged down to -4 from -3.

The forward-looking consumer sentiment index for July stood at 3.5 points, unchanged from June, a monthly survey from the Nuremberg-based GfK Group showed today.

BASF SE, the German chemical company announced on Wednesday that it has reached an agreement to acquire nutritional ingredients and specialty chemicals supplier Cognis GmbH for an equity purchase price of €700 million or $859 million. Including pension obligations and net financial debt, the total enterprise value of the transaction is €3.1 billion or $3.8 billion. The transaction, which is subject to clearance by merger control authorities, is anticipated to close in November 2010.

Upon completion of the acquisition, Cognis will be integrated into the Performance Products division of BASF.

BASF claims that its performance products help customers to improve their products and processes, and provide special characteristics to various everyday products like diapers, paper, vitamins for food supplements, UV filters for sunscreen, plastic additives and products for water treatment, mining applications and for the oil, automotive and coatings industries

Cognis supplies raw materials for the pharmaceutical, food and beverage and dietary-supplement markets, as well as the cosmetics and cleaning-products industries.

Cognis generated sales of about €2.6 billion and earnings before interest, taxes, depreciation and amortization or EBITDA of €322 million in 2009.

BASF reported first-quarter net earnings in late April of €1.03 billion or €1.12 per share, up from €375 million or €0.41 per share last year. Sales for the quarter rose to €15.45 billion from €12.22 billion a year ago.

Gainers & Losers

Air Liquid SA, the producer of industrial gases fell 0.4% to €86.20.

Balda AG traded unchanged at €3.52 after the producer of precision components settled the lawsuit filed because of negligent advice against a former consultant with an out-of-court settlement.

BASF SE, the chemical company rose 1.0% to €47.22.

Bayerische Motoren Werke AG, the automobile manufacturer fell 0.1% to €41.46.

Commerzbank AG, the bank fell 1.6% to €6.05 and Deutsche Bank AG, the global investment bank fell 1.5% to €48.94.

Nexity SA, the property developer rose 2.6% to €23.59.

Sodexo SA fell 2.4% to €47.33 after the catering group downgraded its recommendation on shares of the caterer to “underperform” from “neutral” at Bank of America Merrill Lynch Global Research.

SolarWorld AG rose 0.4% to €10.40 after the manufacturer of silicon solar wafers downgraded its rating to “hold” from “accumulate” at Equinet.

ThyssenKrupp AG, the steelmaker fell 0.8% to €22.20.

Vinci SA, the construction and concession company fell 0.4% to €38.38.