German PPI Rises; Iberdrola Acquires Elektro for $2.4 Billion

Arthi Gupta
20 Jan, 2011
New York City

The European indexes declined tracking lower commodities and a strong GDP expansion in China stoking worries that China may not be able to curb inflation. German producer price inflation rose and Italy

[R]4:00 PM Frankfurt – The European indexes declined tracking lower commodities and a strong GDP expansion in China stoking worries that China may not be able to curb inflation. German producer price inflation rose and Italy’s industrial new orders declined. Iberdrola acquired Brazil-based Elektro for $2.4 billion.[/R]

U.S. stocks declined after weekly jobless claims decreased 37,000 to 404,000 and Asian markets traded lower after strong GDP data from China raised concerns about the lack of effectiveness of tighter monetary policy.

China''s economy grew 9.8% between October and December compared to the same period a year ago, according to official data released today. That followed a 9.6% expansion in the preceding three months. Gross domestic product rose 10.3% in 2010.

Rating agency Moody''s Investors Service on Wednesday assigned a provisional Aaa long-term rating to the first debt issuance program of the European Financial Stability Facility. The outlook on the rating is stable. The overall size of the issuance program is €27 billion.

There is no need to raise euro-zone rescue fund and to restructure Greek debt, European Financial Stability Facility Chief Klaus Regling told German Deutschlandfunk radio on Thursday.

He noted that Spain and Portugal are currently in a position to refinance their debt in the markets and so, there is no urgent need to increase the fund size.

In its latest monthly bulletin, the ECB said euro-zone inflation rate is likely to stay slightly above its 2% target before moderating again towards the end of the year.

European Central Bank Executive Board member Lorenzo Bini Smaghi said in a speech in Italy that placing too much emphasis on core inflation can distort policy inference.

In Paris CAC 40 Index gained 0.90 or 0.02% to close at 3,977.61 and in Frankfurt DAX Index edged lower 40.67 or 0.57% to close at 7,042.07.

German Producer Price Inflation Rises

German producer price inflation rose to 5.3% in December from 4.4% in November, the Federal Statistics Office said today.

On a monthly basis, the producer price index rose 0.7% in December, faster than the 0.2% increase in November.

On an average, factory gate prices for German industrial products grew 1.6% in 2010 compared to 2009, when prices were down 4.2%.

Dutch Consumer Sentiment Improves, Unemployment Falls

An indicator of consumer sentiment in the Netherlands improved more than expected in January. The Central Bureau of Statistics'' consumer confidence index rose to -8 in January from -14 in December.

The number of unemployed people in Netherlands decreased by 31,000 on an unadjusted basis in December from the previous year, data from the Central Bureau of Statistics showed on Thursday. The number of unemployed totaled 373,000.

The jobless rate fell to 4.8% in December, from 5.2% in November. The unemployment rate was 5.2% in December 2009.

On a seasonally adjusted basis, the number of unemployed fell 8,000 from November to 401,000.

Estonia Producer Price Inflation Remains Unchanged

Estonia''s producer price inflation remained unchanged at 5.4% on a yearly basis in December, data released by Statistics Estonia showed on Thursday.

On a monthly basis, the producer price index was flat, compared to the 0.4% rise in November.

Export prices in December increased 0.8% from November and rose 8.4% from last year. Import prices increased 2.7% on a monthly basis and 12.8% annually.

Italy Industrial New Orders Decline

Inbound new orders to Italian industries fell a seasonally adjusted 4.3% on a monthly basis in November. Statistics office Istat said domestic orders fell 3%, while overseas orders dropped 6.2% in November.

On a yearly basis, industrial orders rose 9.6% in November. The turnover of Italian industries climbed 0.2% on a monthly basis and 12.1% on an annual basis in November.

Swiss Investor Confidence Dips

Swiss investor confidence fell in January.

Swiss economic expectations weakened in January, according to survey data released by the Center for European Economic Research, or ZEW, in cooperation with Credit Suisse.

The ZEW-CS sentiment indicator fell 5.9 points to the minus 18.4 in January as 23.7% of the total experts surveyed expected economic momentum to deteriorate ahead.

Iberdrola Buys Brazil-based Elektro

Iberdrola, S.A., the Spanish electric utility announced a deal to acquire Brazilian electricity distribution company Elektro from U.S.-based Ashmore Energy International for $2.4 billion in cash. Iberdrola expects the acquisition to be earnings accretive in the first year of the transaction.

Elektro serves 2.17 million customers mainly in the Sao Paulo state, supplying more than 11,000 GWh of electricity.

For Ashmore, the sale of Elektro is part of a major restructuring and repositioning of the company.

Gainers & Losers

Alstom S.A. surged 4.03% to €41.47 after the power generating equipment maker reported third quarter sales of €5.2 billion.

Autonomy Corporation plc fell 0.28% to 1,404 pence after the company engaged in providing software development and distribution reached a agreement with U.S. based insurer Allstate.

Aviva plc gained 1.52% to 434.80 pence after the insurance group said it plans to reduce its hybrid debt by at least £700 million over the next three years.

Deutsche Lufthansa AG dropped 1.55% to €15.84 after the German Airline said it reached a pay-freeze agreement with UFO trade union representing about 16,000 employees.

Koninklijke Ahold N.V. slid 1.23% to €9.62 after the Dutch supermarket chain operator reported consolidated net sales of €7 billion for the fourth quarter of 2010, an increase of 5.5% over last year, after adjustments for constant exchange rates and the impact of an additional week in 2009.

Novo Nordisk A/S edged lower 1.11% to DKK 624.50 after the Denmark-based health care company announced that it intends to appeal against the adverse U.S. court ruling in Prandin patent case and is evaluating its best options for doing so. The court found that the patent on its combination diabetes drug PrandiMet is invalid and unenforceable.

Recordati S.p.A. declined 0.60% to €6.68 after the Italian pharmaceutical group bought the brand and rights to the product Procto- Glyvenol from Novartis AG for countries in Central and Eastern Europe.