European Indexes Higher; German Import Price Inflation Rises

Arthi Gupta
26 Jan, 2011
New York City

The European indexes gained after successful first bond issue by the European Financial Stability Facility. German import price inflation rose in December. Sweden trade surplus increased in December. Italian retail sales declined in November. Norges Bank held key rate.

[R]4:00 PM Frankfurt – The European indexes gained after successful first bond issue by the European Financial Stability Facility. German import price inflation rose in December. Sweden trade surplus increased in December. Italian retail sales declined in November. Norges Bank held key rate.[/R]

U.S. indexes advanced ahead of the Federal Reserve’s interest rate decision and Asian markets rose on optimism of global economic recovery.

In Paris CAC 40 Index gained 29.49 or 0.73% to close at 4,049.11 and in Frankfurt DAX Index edged higher 68.67 or 0.97% to close at 7,127.68.

First EFSF Bond Issue Successful

The first bond issue by the European Financial Stability Facility on Tuesday to raise funds for the Irish bailout ended up with firm demand, particularly from Asia with the Government of Japan purchasing over 20% of the issue.

A record breaking order book of €44.5 billion was received from more than 500 investors for the €5 billion 5-year bond issue. On February 1, Ireland will receive €3.3 billion of the €5 billion raised.

European Commercial Vehicle Sales Up

European new commercial vehicle registrations increased 8% in 2010, the European Automobile Manufacturers'' Association said on Wednesday.

In December, demand for new commercial vehicles grew by 12.5% with demand rising across segments, except for buses and coaches. New van registrations rose 8.4% and the segment of heavy trucks posted the strongest increase of 70.2%.

German Import Price Inflation Climbs

Germany''s import price inflation rose to 12% in December from 10% in November, the Federal Statistics Office said. According to the statistics office, the latest rate of inflation was the highest since October 1981.

On a monthly basis, import prices rose 2.3% in December compared to the 1.2% rise in November.

Export prices increased 5.2% annually in December compared to 4.5% rise in November. On a monthly basis, export prices rose 0.8% in December faster than the 0.3% increase in November.

Spain Reduces Central Government Deficit, Mortgage Approvals Higher

Spain reduced central government deficit more than targeted, Finance Minister Elena Salgado said on Tuesday.

Central government deficit was €53.4 billion or 5.1% of gross domestic product in 2010. That was better than the 2010 deficit target of 6.7% of GDP and the expected deficit of 5.9%.

The number of mortgages approved for home purchases in Spain rose sharply during November, official data has shown.

Approvals edged higher 11.7% in November compared to the previous month to around 44,200, the statistics office INE said.

The Spanish government''s decision to new implement new capital requirements for the country''s banks is positive, but raises doubts whether the new measures will ultimately restore market confidence, Fitch Ratings said on Wednesday.

On Monday, Spanish finance minister Elena Salgado announced that the government will force the cajas to raise their core capital ratios to 8% by September and meet Basel III conditions. To achieve the target, Salgado said the banks will require no more than €20 billion or 1.9% of Spain''s gross domestic product.

The rating agency sees certain issues arising from the new requirements that make it unclear whether they will achieve the government''s ultimate goal, which is to restore market confidence.

Sweden Trade Surplus Rises

The Swedish trade surplus increased to SEK 10.9 billion in December from SEK 10.5 billion in November, Statistics Sweden said on Wednesday. The value of exports climbed 21% annually to SEK 102 billion and imports rose 15% to SEK 91.1 billion.

Italian Retail Sales Decline

Italy''s retail sales fell a seasonally adjusted 0.3% on a monthly basis in November compared to a 0.3% rise in October, according to latest data from Istat.

On an annual basis, retail sales climbed 1% in November following the 0.6% decline in October.

Norges Bank Holds Key Rate

Norway''s central bank on Wednesday decided to retain the key policy rate at 2% for a sixth straight rate-setting session in a bid to bring inflation close to target and control surging house prices.

The central bank said activity in the global economy is increasing and commodity prices are rising, but the outlook for Europe remains highly uncertain.

Vivendi Exits from NBC

Vivendi SA announced the completion of the sale of its remaining 12.34% stake in U.S. media firm NBC Universal to General Electric Co. for $3.8 billion. The company concluded the sale on January 25.

Vivendi''s exit from NBC was part of a joint venture deal between Comcast Corp. and GE. The joint venture would be 51% owned by Comcast, 49% owned by GE and managed by Comcast.

Gainers & Losers

ABB Ltd. gained 1.66% to Sfr22.64 after the electrical engineering company issued a trading update related to its fourth-quarter results. The company noted that it expects to report double-digit growth in orders compared to the year-ago period, as well as a double-digit increase in earnings before interest and taxes and net income, as its short- and mid-cycle businesses in the automation and power sectors benefited from high levels of industrial activity.

Also, ABB Ltd and Baldor Electric Co. announced the completion of the cash tender offer for all the outstanding shares of common stock of Baldor by ABB''s subsidiary, Brock Acquisition Corp. The tender offer expired on January 25.

Luxottica Group S.p.A. climbed 0.06% to $31.02 after the Italian eyewear maker’s rating has been cut to “neutral” from “buy” by Nomura.

Randstad Holding NV fell 0.46% to €38.25 after the Dutch staffing company was upgraded to ""outperform"" from ""neutral"" by Credit Suisse.

SAP AG declined 0.67% to $55.16 after the German software company announced its preliminary financial results for the fourth quarter. Total revenue, on IFRS basis, grew 27.2% to €4.06 billion from €3.19 billion in the year-ago quarter. Profit, on IFRS basis, declined 36% to €437 million from €681 million in the prior-year quarter. Earnings per share declined to 0.37 euros from 0.57 euros a year ago.

STMicroelectronics N.V. surged 3.20% to €8.44 after the chip-maker’s stock was upgraded from “reduce” to “hold” by Kepler Capital Markets.