Greece Strike and Spain Debt Worries Drag European Indexes

Arthi Gupta
15 Dec, 2010
New York City

The European indexes slid after Moody

[R]4:00 PM Frankfurt – The European indexes slid after Moody’s warned Spain of possible credit rating downgrade. Greece strike paralyzed normal life. Sweden hiked key rate to 1.25%. Novartis took full ownership of Alcon in $12.9 billion agreement. X5 Retail completed acquisition of Kopeyka.[/R]

A nation-wide strike today protesting the Greek government''s additional austerity measures, which were passed by the Parliament crippled normal life in the country. The bill envisages a limit on gross monthly pay at €4,000, and a 10% cut on salaries over €1,800 of all government-owned companies.

All schools, hospitals and public-sector services remained closed while air, road and water transport came to a standstill in Greece. Athens International Airport said all flights to and from Greece were canceled as air traffic controllers joined the stir.

Ratings agency Moody''s placed Spain''s Aa1 credit rating on review for a possible cut on Wednesday citing the country''s deteriorating fiscal position.

The agency said key factors in its decision was Spain''s ""vulnerability to funding stress"" given its high refinancing needs in 2011 and a potential further increase in the public debt ratio.

""This vulnerability has recently been amplified by fragile market confidence,"" Moody''s said.

Spain''s IBEX 35 index declined 1.8% on news of a possible downgrade by Moody’s.

In Paris CAC 40 Index declined 34.26 or 0.88% to close at 3,868.61 and in Frankfurt DAX Index edged lower 47.90 or 0.68% to close at 6979.50.

Euro Area Employment Unchanged

Second quarter employment was unchanged in the euro zone and fell 0.2% in wider euro area of 27 nations compared to previous quarter. Compared to the second quarter of 2010, employment fell 0.6% in the euro zone and EU27 region.

European New Car Registrations Slackens

New passenger car registrations in Europe dropped at a slower annual pace of 7.1% in November compared with October''s 16.6% fall, the European Automobile Manufacturers'' Association said.

In November, registrations fell in all major markets. Germany saw a 6.2% drop followed by a 10.8% decline in France and 11.5% decrease in the UK.

Spanish Inflation Flat

Consumer prices in Spain increased 2.3% annually in November, unchanged from October, the National Statistics Institute said on Wednesday. Core consumer prices, which exclude food and energy items rose 1.2%.

On a monthly basis, consumer prices climbed 0.5% in November.

Swiss ZEW Economic Expectations Improve

Economic expectations for Switzerland brightened up in December, according to results of a monthly survey by the Centre for European Economic Research in cooperation with Credit Suisse.

The sentiment indicator increased 18.4 points to minus 12.5 in December.

Sweden Raises Key Rate

The Swedish central bank raised its key interest rate by a quarter percentage point to 1.25% at the end of its two-day monetary policy meeting on Wednesday, citing medium-term inflationary pressures.

""Underlying pressures are still low in Sweden, but are expected to increase as economic activity strengthens,"" the Riksbank said.

The Riksbank also sharply raised its 2010 growth forecast for the Swedish economy to 5.5% from the 4.8% projection in October, while the growth outlook for 2011 was raised to 4.4% from 3.8%.

Norway Retains Key Rate

Norway''s central bank decided to retain the key policy rate at 2% for a fifth straight rate-setting session amid rising house prices and low inflation.

Novartis Completes Alcon Merger

Novartis AG, the Swiss pharmaceutical firm announced a deal to merge with eye care company Alcon, Inc. for a total consideration of $12.9 billion or $168 per share for the Alcon shares it does not currently own. The total merger consideration comprises up to 215 million Novartis shares and a potential contingent value amount.

The consideration will be calculated as up to 2.8 Novartis shares and a contingent value equal to $168 to be settled in cash. If the value of 2.8 Novartis shares is more than $168, the number of Novartis shares will be reduced accordingly.

X5 Retail Completes Acquisition of Kopeyka

X5 Retail Group N.V. announced the completion of the acquisition of Kopeyka discounter chain. In accordance with the agreement, X5 acquired 100% of the business and assets of Kopeyka for a price of 51.5 billion ruble, including assumption of Kopeyka''s net debt of no more than 16.5 billion ruble.

Gainers & Losers

BG Group plc fell 0.76% to 1,308.00 pence after the natural gas company announced a discovery on Block 64/11 offshore China after the Lingshui 22-1-1 exploration well encountered gas-bearing sands.

H & M Hennes & Mauritz AB dropped 1.88% to SEK 239.90 after the Sweden-based fashion retailer said its November 2010 sales in local currencies including VAT increased 17% compared with last year. In comparable units, sales rose 8% for the same month.

Hochtief AG gained 1.58% to €65.40 after the construction group said its board recommended to reject the public takeover offer by the Spanish construction group ACS, Actividades de Construcción y Servicios, S.A.

The Royal Bank of Scotland Group plc declined 0.68% to 41.06 pence after the financial services group entered into an agreement with DBS Group Holdings to transfer certain staff and customers of its retail and commercial business in China to DBS.

Siemens AG rose 1.70% to €92.68 after the German engineering giant said it will sell Siemens IT Solutions and Services to French IT services firm Atos Origin.

In exchange, Siemens will receive 12.5 million newly issued shares of Atos Origin with a value determined for the deal of €414 million, representing 15% of the new company''s total share capital, with a five-year lock-up commitment. Siemens will also receive a cash component of about €186 million.