European Markets Slide on U.S. Jobs Data

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

The European markets slide after disappointing U.S. private sector employment report. ECB agrees to lend $161 billion to banks and extends bank support schemes in Netherlands, Slovenia, Greece and Poland. Portuguese government uses

[R]4:00 PM Frankfurt - The European markets slide after disappointing U.S. private sector employment report. ECB agrees to lend $161 billion to banks and extends bank support schemes in Netherlands, Slovenia, Greece and Poland. Portuguese government uses “golden share” to block Telefonica offer.[/R]

European banks borrowed less than expected from the European central bank, easing concerns about the health of the region''s banking system. The European Central Bank said it will lend €131.9 billion or $161 billion to banks for three months at a fixed 1% rate. Analysts expected the banks to borrow more than €200 billion.

Euro-zone inflation eases to 1.4% and German unemployment declines in June.

Multi-Color Corp. agrees to acquire 100% ownership of the Italian-based company, Guidotti CentroStampa SPA.

In London FTSE 100 Index traded lower 2.39 or 0.05% to 4,911.83, in Paris CAC 40 Index decreased 11.70 or 0.34% to close at 3,421.29, in Frankfurt DAX Index traded lower 1.19 or 0.02% to close at 5,950.84. In Zurich trading SMI Index decreased 22.40 or 0.36% to close at 6,122.05.

The European Commission on Wednesday extended Dutch and Slovenian bank guarantee schemes and the Greek and Polish bank support measures until the end of this year. The Commission already extended its authorization of bank guarantee schemes in Sweden, Germany, Austria, Latvia, Ireland, Spain and Denmark.

The extended schemes require the banks to pay higher premiums for the guarantees granted by the state. This is to encourage banks to finance themselves without state support and to limit distortions of competition.

Euro-zone annual inflation eased to 1.4% in June from 1.6% in May, according to a flash estimate issued by Eurostat, the statistical office of the European Union.

European Central Bank President Jean-Claude Trichet said last week that additional small increases in the inflation rate are likely in the second half of the year.

German unemployment decreased 21,000 in June following a revised decline of 41,000 in May, data released by the Federal Labor Agency showed Wednesday. The number of unemployed decreased for the twelfth consecutive month.

Germany''s Federal Statistical Office said the number of people employed in the country totaled 40.2 million at the end of May. Compared with a year ago, this represents an increase of 60,000 or 0.1% and marks the first annual growth in employment in 12 months. On a seasonally adjusted monthly basis, employment increased by 61,000 or 0.2% in May following a 0.2% rise in April and a 0.1% gain in March.

The Portuguese government used its special voting rights to block Telefonica''s €7.15 billion or $8.72 billion bid to buy Portugal Telecom''s stake in Brazil''s leading cell phone company Vivo.

Portuguese state-owned news agency Lusa said Portugal Telecom shareholders had voted today in favor of the sale of PT''s 50% stake in Brasilcel, a holding company which in turn owns 60% of Vivo. Spain''s Telefonica owns the other 50% of Brasilcel.

Lusa said the Portuguese state stepped in after the vote at a closed-door meeting, using its so-called ""golden share"" in Portugal Telecom which grants it the final say in strategic decisions.

Multi-Color Corp. agrees to acquire 100% ownership of the Italian-based company, Guidotti CentroStampa SPA, for a purchase price of about €50.5 million. The acquisition is expected to close on or about July 1, and is expected to be immediately accretive to earnings for MCC.

The company said that about 80% of the purchase price will be paid in the form of cash and 20% in the form of MCC stock at an agreed price.

Guidotti CentroStampa, a leading European wine, spirit & olive oil specialist, has annual revenues of about €35 million and supplies the Italian market, the French and Spanish wine markets and the UK and Eastern European spirit markets.

MCC believes that the acquisition will expand its ""Collotype"" Wine & Spirit Label division globally. With the addition of Guidotti CentroStampa, MCC will become the only global wine & spirit label specialist with reach into regions with over three quarters of world wine production, the company said.

Gainers & Losers

Alstom SA rose 1.0% to €37.91 after the power and rail engineering group and Transmashholding signed a contract for the design and manufacturing in Russia of key components for the EP20 electric locomotive.

BNP Paribas SA rose 1.3% to €44.35, Commerzbank AG fell 0.3% to €5.79 and Credit Agricole SA rose 2.8% to €8.57.

Deutsche Bank AG rose 1.1% to €46.53 after the global investment bank announced that it has made seven appointments to its institutional sales team for China, who will focus on marketing global products to Chinese financial institutions.

Faurecia SA rose 2.7% to €13.27 after the automotive equipment supplier has signed an agreement today to acquire Plastal Spain, a Tier 1 supplier of plastic exterior parts for the automotive industry.

France Telecom SA fell 2.0% to €14.15 after the telecommunication operator downgraded its recommendation to “neutral” from “buy” at Goldman Sachs Group Inc.

Safran SA rose 0.2% to €23.02 after the high-technology company withdrew from active service its last four Super Frelon helicopters, France’s largest helicopter. Stepping in to fill the breach is the EC225, the first of which was delivered to the Navy in April of this year.

Siemens AG, the multinational company rose 0.8% to €74.16.

Societe Generale SA, the bank rose 1.6% to €34.35.

Total SA, the integrated international oil and gas company rose 0.4% to €36.92.