European Indexes Up; Safran Deal

Arthi Gupta
20 Sep, 2010
New York City

The European indexes rose after the Bundesbank expressed confidence German banks could meet higher capital requirements. Greek current account deficit narrowed in July. L-1 Identity Solutions agreed to be acquired by France based conglomerate Safran SA.

[R]4:00 PM Frankfurt – The European indexes rose after the Bundesbank expressed confidence German banks could meet higher capital requirements. Greek current account deficit narrowed in July. L-1 Identity Solutions agreed to be acquired by France based conglomerate Safran SA.[/R]

U.S. stocks edged higher and Asian markets traded mixed.

A private think tank raised its growth outlook for Swiss economy. Dutch consumer confidence fell in September.

In Paris CAC 40 Index increased 19.25 or 0.52% to close at 3,741.27 and in Frankfurt DAX Index edged higher 18.35 or 0.30% to close at 6,228.11.

The European Central Bank governing council member Ewald Nowotny said in an Internet chat with readers of Austrian daily newspaper Der Standard today that financial markets are currently not a source of danger for inflation.

The Bundesbank said in its monthly report today that Germany''s banks would be able to meet higher capital requirements as per new Basel norms via accumulated earnings or capital increases, without hurting the real economy.

The central bank noted new measures will not reduce bank lending but are likely to reduce the earning prospects of the banks.

In another report, Germany''s finance ministry estimated the economic recovery to continue into the second half of the year, albeit at a significantly slower pace. The ministry noted consumer spending is likely to pick up and help to further stimulate domestic demand.

The Greek current account deficit narrowed to €1.48 billion in July, from €1.67 billion deficit recorded a year ago, the Bank of Greece said today. This improvement was mainly due to a decrease in the trade deficit and a small rise in the surplus of the services balance, the bank said.

The trade deficit, excluding oil decreased to €1.67 billion from €2.25 billion last year. At the same time, the services account balance showed a surplus of €2.36 billion, up from €2.30 billion surplus a year ago.

According to another report by the Financial Times a ""stress"" test assessing the health of debt-stricken Greece''s banks has been postponed by a month to give officials more time to ensure that the banking system is adequately capitalized against losses.

The paper quoted a senior-ranking Greek banker as saying the European Union, the European Central Bank and the International Monetary Fund will now ask for the tests to be held at the end of October. The three had put together a €110 billion bailout package to prop up Greece''s finances.

Switzerland''s KOF economic institute raised the growth forecast for this year to 2.7% from 1.8% predicted in June, citing a strong upturn in global economy. The think tank further projected a 1.8% growth for the Swiss economy next year, compared to 1.6% predicted earlier. For 2012, growth is seen at 2.2%.

Inflation is projected to be around 0.8% this year and 0.7% next year, and may accelerate to 1.1% in 2012.

Dutch consumer confidence index decreased to minus 14 in September from minus 11 in August, according to a report released by the Central Bureau of Statistics today.

L-1 Identity Solutions Inc., the personal identity protection solutions provider agreed to be acquired by Paris-based aerospace, defense and security firm Safran SA for $12 per share in cash. The deal values L-1 Identity at about $1.6 billion, including its outstanding debt.

The per share price represents a premium of 24% over L-1''s closing stock price on the NYSE on September 17, 2010 and a premium of 66% over the closing stock price on January 5, 2010, the day prior to its announcement of strategic alternatives review process.

BP plc successfully completed the ""Bottom Kill"" procedure to permanently seal the blown-out Macondo oil well in the Gulf of Mexico. The company confirmed that both the casing and annulus of the well were sealed by cement pumped through the relief well, and it will now go ahead to complete the abandonment of the well.

Alitalia, the Italian carrier is considering cutting up to 1,400 positions under a restructuring plan and may not renew the contracts of 600 temporary staff, Italian media reported on Sunday.

Gainers & Losers

Banco Santander, S.A. fell 0.81% to €9.59 after the lender is likely to postpone its plans for a partial sell-off its UK business until at least 2011, according to media reports.

Fiat SpA soared 3.67% to €10.74 after the carmaker hired Toyota executive Andrea Formica to head the Fiat brand, replacing Lorenzo Sistino, who will oversee international operations.

Roche Holding AG gained 0.44% to Sfr137.80 after the Swiss pharmaceutical company said its tumor medicine, Avastin failed to achieve the objective of a late-stage study in early colon cancer.

SEGRO plc advanced 1.78% to 268.50 pence after the provider of flexible business space in Europe was upgraded to “neutral” from “sell” at Goldman Sachs Group Inc.