EU Leaders Agree on Bailout Fund Conditions

Arthi Gupta
17 Dec, 2010
New York City

The European indexes fell after euro-zone trade surplus exceeded in October. The EU decided to set up a permanent bailout mechanism. German business confidence rose in December. The IMF noted recovery in the Danish economy.

[R]4:00 PM Frankfurt – The European indexes fell after euro-zone trade surplus exceeded in October. The EU decided to set up a permanent bailout mechanism. German business confidence rose in December. The IMF noted recovery in the Danish economy.[/R]

U.S. stocks traded sideways and Asian markets traded mixed.

European Union leaders decided on Thursday to establish a permanent bailout mechanism for debt-trapped economies from 2013 and not to raise the size of the existing temporary rescue fund.

The permanent ""bailout"" mechanism for member states in financial difficulty must clearly detail how the private sector would be brought in to help, how non-euro-zone countries would be involved, and how the EU budget would be affected, according to a resolution adopted by Parliament on Thursday.

In May, the council and the member states had agreed on a temporary mechanism to preserve financial stability totaling €750 billion, including a European Financial Stabilization Mechanism and a European Financial Stability Facility with a total volume of up to €440 billion. Leaders decided not to raise the size of the €440 billion fund.

Moody''s Investors Service reduced its rating on Ireland to Baa1 from Aa2, while maintaining its outlook at ''negative.'' The rating agency blamed the Republic''s deteriorating fiscal position. The move comes just a few weeks after Dublin agreed an €85 billion bailout deal with the European Union and the IMF.

In Paris CAC 40 Index declined 7.24 or 0.19% to close at 3,881.12 and in Frankfurt DAX Index edged lower 5.58 or 0.08% to close at 7018.82. For the week, the CAC 40 Index gained 0.62%.

Euro-zone Trade Surplus Climbs, Construction Output Flat

Euro-zone unadjusted trade surplus rose to €5.2 billion in October from the revised €2.6 billion surplus in September, European Union Statistics agency Eurostat said.

Exports rose 20% year-on-year, while imports climbed 21% in October, official data showed.

After adjusting for seasonal variations, trade surplus increased to €3.6 billion from September''s €2 billion. Exports dropped 0.1% on a monthly basis and imports decreased 1.3%.

Seasonally adjusted construction activities in October stable in euro area and rose 0.5% in the EU27 compared to a month ago. In September, activities in EU area fell 1.6% and 1.2% in EU27.

German Business Sentiment Rises

German business confidence rose unexpectedly to 109.9 in December, according to a monthly survey from Ifo institute.

The expectations index also improved in December, to 106.9 from 106.3 in November. At the same time, the current conditions index advanced to 112.9 in December, from the November reading of 112.3.

French Manufacturing Business Confidence Improves

French manufacturing business confidence climbed to 103 in December from 100 recorded in November, according to survey results from the statistics office Insee.

IMF Notes Danish Economy Recovering

The International Monetary Fund noted that the Danish economy is recovering as result of a strong policy response. Additionally, the Fund stated that this stabilized output and the banking system and prevented an increase in structural unemployment.

However, the lender is of the view that more efforts are needed to curb consumption growth to meet the government''s deficit goals.

KOF Institute Lifts Swiss Growth Forecast

Switzerland''s gross domestic product is now projected to rise 1.9% next year, from 1.8% estimated in September, according to the KOF economic institute. At the same time, the institute retained the growth estimate for this year at 2.7% but the growth projection for 2012 has been lowered to 2% from 2.2%.

Galapagos Extends Contract with Amgen

Galapagos NV said that its BioFocus service division extended its contract with Amgen for 2011 and 2012, with an expansion to include target discovery and validation services.

Under the terms of the extended agreement, Galapagos will receive €2.0 million or $2.6 million in research fees for the first year. Additionally, Galapagos is eligible to receive payments of access fees and success-based milestones.

Haldex Sells Unit to BorgWarner

Haldex AB, a Swedish developer of brake systems for heavy vehicles, said it reached a deal to sell its Traction Systems division to Auburn Hills, Michigan-based vehicle supplier BorgWarner Inc. for SEK 1.43 billion or about $210 million in cash on a debt free basis.

The company estimates a capital gain of approximately SEK 1.10 billion from the transaction.

Gainers & Losers

AstraZeneca PLC fell 0.10% to $49.23 after the biopharmaceutical company announced that the US Food and Drug Administration issued a complete response letter for the New Drug Application for ticagrelor tablets, BRILINTA.

Intermediate Capital Group plc declined 1.79% to 323.10 pence after the investment firm and asset manager said it finalized the acquisition of a 51% stake in Longbow Real Estate Capital, the UK real estate debt specialist, subject to regulatory approvals.

Nokia Corp. gained 0.51% to $9.91 after the mobile phone maker said it filed new claims in the UK, Germany and the Netherlands against its rival Apple Inc., alleging patent infringement in many of its products, including iPhone, iPad and iPod Touch.

Royal Dutch Shell plc climbed 0.31% to 2,075.00 pence after the independent oil and gas company said it issued 18.3 million class A ordinary shares for its dividend program for the third quarter 2010 interim dividend.

Sonova Holding AG rose 1.05% to Sfr124.80 after the Switzerland-based company operating in the healthcare sector was cut to “neutral” from “buy” at UBS AG.