Merkel, Sarkozy Call European Summit; LVMH, Volvo Net Rise

Marcus Jacob
04 Feb, 2011
New York City

European indexes opened higher but struggled near close. German Chancellor Merkel and French President Sarkozy proposed a meeting of 17 European nations to harmonize tax structure and delink wages from inflation and rationalize bank lending rules. LVMH and AB Volvo net surge.

[R]4:30 PM Frankfurt – European indexes opened higher but struggled near close. German Chancellor Merkel and French President Sarkozy proposed a meeting of 17 European nations to harmonize tax structure and delink wages from inflation and rationalize bank lending rules. LVMH and AB Volvo net surge.[/R]

European indexes were mixed after the release of weaker than expected job increase in the U.S. and instability in Egypt continued on the eleventh day. Commodities prices hovered near elevated levels as investors fear that unrest may spread to oil producing nations in the Middle East.

The DAX index increased 5.16 to 7,198.84 and CAC-40 index declined 0.41 to 4,036.18. IBEX 35 Index fell 61.30 or 10,799.40 and MIB Index in Milan surged 0.8% to 22,622.00.

Bayerische Motoren Werke AG increased 0.5% but declined at close to 56.90 after chief financial officer said in Cape Town, South Africa that the sales in the first half are expected to increase “significantly.” Friedrich Eichiner said sales in China are expected to increase “double digit.”

European leaders may meet as early as March to tackle competitive issues hobbling the region. German Chancellor Angela Merkel and French President Nicolas Sarkozy called a meeting of leaders.

The joint proposal by two leaders was described as a “pact for competitiveness” by the two leaders and bureaucrats stressed that it was only a proposal and not a directive to other leaders.

Merkel has been in the past been a reluctant leader in pushing for economic convergence in the region and stayed away from the supporting reforms in the early phase of financial crisis but is now focused on developing a consensus in the region.

French officials said that the meeting could be delayed as late as the scheduled meeting of EU 27 nations.

Merkel and Sarkozy proposal focuses on developing a harmonized tax structure so that in the future one country, like Ireland, cannot attract companies in the region to avoid taxes elsewhere, to eliminate wage indexation to inflation and to rationalize rules for bank lending.

Stock Movers

AB Volvo, the supplier of commercial transport solutions provider said fourth quarter net sales increased 23% to SEK73.4 billion from SEK59.8 billion a prior year. Net income in the quarter was SEK3.4 million or SEK1.59 per diluted share compared to net loss SEK1.99 million or SEK0.99 per share a year ago.

LVMH Moet Hennessy Louis Vuitton SA, the France-based luxury goods company reported revenue increased to 20.32 billion euros from 17.05 billion euros a prior year. Net profit in the quarter was 3.32 billion euros or 6.32 euros a diluted share compared to 1.97 billion euros or 3.70 euros per share a year ago.

The stocks declined 3% to 113.50 euros on weaker than expected operating net.

Nordea Bank AB declined 5.1% to SEK 74.45 after the Swedish government plans to lower its stake in the bank by $3 billion and repay state debt according to local media reports in Sweden.

YIT Oyj gained nearly 9% to 19.35 euros after the Finland’s largest builder net in the fourth quarter rose to 81.5 million euros.