Positive Sentiment in European Markets

Arthi Gupta
21 Sep, 2010
New York City

The European indexes rose after the French economic index accelerated in July. The EU extended Irish bank guarantee scheme. Fitch affirmed Germany''s sovereign ratings. Spanish export growth slowed in July.

[R]4:00 PM Frankfurt – The European indexes rose after the French economic index accelerated in July. The EU extended Irish bank guarantee scheme. Fitch affirmed Germany''s sovereign ratings. Spanish export growth slowed in July.[/R]

Dutch home sales fell in August, Spain’s exports growth slowed in July and Swiss exports growth regained momentum in August. U.S. stocks traded sideways and Asian markets traded mixed.

IATA tripled 2010 global profit forecast for airlines.

In Paris CAC 40 Index increased 22.18 or 0.59% to close at 3,810.9 and in Frankfurt DAX Index edged higher 21.13 or 0.34% to close at 6,315.71.

The European Commission approved the extension of a guarantee scheme for Irish credit institutions, covering certain short-term liabilities.

""The guarantees are necessary to ensure continued access to funding for Irish banks in the coming months thereby contributing to financial stability in Ireland,"" the commission said in a statement.

Earlier today, the Republic of Ireland successfully raised €1.5 billion through the sale of four and eight-year bonds, alleviating concerns of falling investor confidence in the country''s economy. Ireland sold €500 million of 4 year bonds at a yield of 4.767% and €1 billion of 8 year bonds at an yield of 6.023%.

The Conference Board Leading Economic Index of France surged 0.9% from June compared to the fall of 0.3% in June. Five of the seven components of the index increased in July, led by yield spread, housing permits, and industrial new orders.

The coincident index rose 0.1% in July following a 0.1% decrease in June as a result of increasing industrial production wages, employment and personal consumption.

Fitch Ratings on Monday affirmed Germany''s sovereign ratings, as the nation''s economic outlook has been enhanced by strong macroeconomic performance.

The rating agency affirmed long-term foreign and local currency Issuer Default Ratings at ''AAA''. The outlooks on the IDRs remained stable. Fitch simultaneously affirmed Germany''s country ceiling at ''AAA'' and short-term foreign currency IDR at ''F1+''.

Fitch now expects the largest euro-zone economy to expand 3.6% this year and at around 2% for 2011 and 2012, as the pace of the recovery, particularly of global trade, moderates.

On an annual basis, Spanish exports grew 13.2% in July, compared to the 16.6% growth in June, according to a report released by the Ministry of Industry, Tourism and Commerce today. Imports also climbed 16.7% in July, following a 22.1% rise in June.

The number of owner occupied homes sold in August decreased 0.4% in August from a year ago, the Dutch statistics office said today. Compared to July, home sales fell 0.2%.

Swiss export growth regained momentum in August after considerable slackening in the previous month, official data showed Tuesday.

Exports grew by 8.6% in August from the previous year, following a 1.8% rise in July. On a monthly basis, imports recorded a seasonally adjusted 9.1% increase, reversing the 3.4% drop in July.

At the same time, trade surplus narrowed significantly in August as import growth outpaced export growth. Trade surplus fell to Sfr568 million from Sfr2.84 billion in July.

Switzerland''s M3 money supply climbed 6.6% on an annual basis in August compared to a 6.5% increase in July, the Swiss National Bank said today.

Data from the Federation of the Swiss Watch Industry FH showed today that watch exports surged 24.1% in August from last year with the export value amounting to Sfr1.07 billion, nearly equaling the 2008. In real terms, watch exports surged 29.6%. At the same time, wrist watches exports grew 25.9%.

The International Air Transport Association said 2010 industry profit will be more than three times of the previous projection, citing a stronger and faster industry recovery that results in higher demand and yield improvements. However, the association said 2011 outlook is weaker, and the profit is expected to drop.

IATA currently projects 2010 profit of $8.9 billion, higher than $2.5 billion expected in June.

European airlines are expected to record a loss of $1.3 billion, narrower than previous expectation of a loss of $2.8 billion. The gains are largely attributed to traffic into Europe, boosted by the low currency which stimulated exports and improved the air cargo business.

BHP Billiton Group extended its all-cash tender offer to acquire all of the issued and outstanding common shares of Canada based fertilizer maker Potash Corp. of Saskatchewan, Inc.

The U.S. investment fund Kohlberg Kravis Roberts & Co. and France''s Wendel said they would sell 23.7 million shares or a 9% stake in French electrical equipment maker Legrand SA.

Gainers & Losers

Deutsche Bank AG gained 0.28% to €47.01 after the German lender said it may raise up to €10.2 billion in its largest rights issue to increase its flexibility to take over Deutsche Postbank and bolster its capital position in light of new adequacy rules.

Deutsche Lufthansa AG climbed 2.36% to €13.66 after the aviation company is likely to announce a successor to its Chief Executive Officer.

Dexia SA rose 1.92% to €3.29 after the Franco-Belgian bank was acquitted of any wrongdoing in the Lernout & Hauspie Speech Products NV case by a Belgian court of appeal.

Draka Holding NV soared 3.34% to €11.90 after the cable maker said it intends to appoint a chief financial officer to join its board of management. L.H. Koo, Chief Operating Officer of the company decided to leave the company on January 1, 2011.

L''Oreal SA dropped 1.07% to €83.98 after the cosmetics company ended its relationship with photographer Francois-Marie Banier.

M&T Bank Corporation declined 1.10% to $90.00 after the regional lender is considering giving up a majority stake to Banco Santander SA through a merger with the Spanish bank''s U.S. unit, while retaining some elements of control, according to Bloomberg news.