European Markets Focus on Bank Stress Test

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

European markets advance on the gains in banks.. EU confirms euro-zone first quarter GDP grows 0.2%. German factory orders decline in May. Greek inflation slackens in June. Total E&P Canada agrees to buy UTS Energy.

[R]7:00 PM Frankfurt - European markets advance on the gains in banks.. EU confirms euro-zone first quarter GDP grows 0.2%. German factory orders decline in May. Greek inflation slackens in June. Total E&P Canada agrees to buy UTS Energy.[/R]

Banks were in trading focus after the regulators prepare stress test procedures. Large banks are expected to meet the stress tests requirements and may not need new capital meet regulatory requirements.

In London FTSE 100 Index traded lower 18.43 or 0.37% to 4,946.57, in Paris CAC 40 Index decreased 8.78 or 0.26% to close at 3,414.58, in Frankfurt DAX Index traded lower 19.67 or 0.33% to close at 5,921.31. In Zurich trading SMI Index decreased 16.33 or 0.27% to close at 6,046.79.

European bank regulators are due to issue the stress tests metrics aimed to assess the resilience of the major financial institutions of the euro-zone. The Committee of European Banking Supervisors will outline their tests of the region''s banks.

The European financial system has shown signs of strain associated with the mounting sovereign debt problems of a number of EU member states.

European Union statistics office Eurostat today confirmed 0.2% sequential growth in euro-zone gross domestic product in the first quarter after rising at 0.1% in the fourth quarter of last year. The economy expanded 0.6% annually in the first three months of 2010, after shrinking 2.1% in the previous three-month period.

Compared to the previous year, EU27 GDP rebounded with a 0.5% growth.

Germany''s seasonally adjusted factory orders fell in May for the first time in five months, according to data released by the Federal Ministry of Economics and Technology today.

Driven by weak demand from euro-zone, factory orders fell 0.5% in May from a revised 3.2% growth in April. Domestic orders fell 0.6% and foreign orders dropped 0.3%.

On an annual basis, seasonally adjusted total factory orders grew 24.8% in May, slower than April''s 30.1% increase.

Greek consumer price inflation eased in June, the statistics office said today. The consumer price index rose 5.2% year-on-year in June, slower than a 5.4% growth in the previous month. Inflation rate eased for the first time since May 2009.

Month-on-month, the CPI slipped 0.3% in June, compared to a 0.8% growth in the preceding month.

The French trade deficit increased to €5.5 billion in May from €4.25 billion in April, data from the Customs Office noted the largest deficit since October 2008.

UTS Energy Corp. announced that its board has unanimously approved a plan of arrangement, whereby Total E&P Canada Ltd. would acquire all common shares of UTS for $1.5 billion or $3.08 a share and shares in a new, publicly-traded exploration and development company, SilverBirch Energy Corp.

The company said the cash consideration to be received by UTS shareholders represents a 46% premium to the closing price on July 6 of $2.11 per share and a 36% premium to 30-day volume weighted-average trading price of $2.26.

The plan is subject to court approval and must be approved by two-thirds of the votes cast by UTS shareholders at a special meeting expected to be held in September 2010.

Intergraph Corp., an engineering and geospatial software provider, announced the signing of an agreement to be acquired by Hexagon AB, a global measurement technology company, in a transaction valued at about $2.125 billion.

The transaction is expected to be completed in the third or fourth quarter of 2010.

Gainers & Losers

Accor SA rose 1.8% to €23.20 after the hotel group was upgraded to “buy” from “add” at Oddo & Cie.

Air Berlin Plc fell 1.1% to €3.40 after the airline passenger count increased 3.4% to 3,022,294. Revenue per available seat kilometer decreased 9.3% to 5.51 eurocents.

Bayerische Motoren Werke AG, the automobile manufacturer fell 0.03% to €38.99.

DL Software, the software maker fell 0.3% to €13.60.

HeidelbergCement AG, the producer of cement fell 5.0% to €36.98.

Lafarge SA fell 2.9% to €40.32 after the cement maker yesterday placed 550 million in U.S. dollar bonds with a 5-year maturity and a fixed coupon of 5.5% to institutional investors in the United States.

LDC SA, the provider of poultry products rose 2.5% to €78.90.

PSA Peugeot Citroen SA rose 1.0% to €21.78 an automaker said first half ending in June worldwide sales of assembled vehicles and CKD units increased 16.9% to 1,856,000.

In a passenger car and light commercial vehicle market that rose 1.1% in the first half. During the period, market share improved by one percentage point to 14.6% compared to first-half 2009. In the light commercial vehicle market share increased to 9.4%

Sodexo SA fell 2.4% to €46.47 after the catering group announced organic growth of sales were 1.9% for the first nine months of the fiscal year. On-site service solutions sales rose 1.6% and motivation solutions sales increased 6.9%. The full year operating profit will be between €780 million and €800 million.

ThyssenKrupp AG, the producer of steel fell 2.8% to €20.57.

Volkswagen AG fell 0.6% to €69.02 after the automobile manufacturer continued on its growth path in Mexico. The company is aiming to sell one million vehicles per year in the USA by 2018. Volkswagen plans increase investment in Mexico.