Euro-zone Sets Up Bailout Fund; Danone Net Surges 38%

Arthi Gupta
15 Feb, 2011
New York City

The European indexes rose after weaker-than-expected domestic economic growth data. Euro-zone finance ministers agreed to set up a permanent sovereign bailout fund for the region of

[R]4:00 PM Frankfurt – The European indexes rose after weaker-than-expected domestic economic growth data. Euro-zone finance ministers agreed to set up a permanent sovereign bailout fund for the region of €500 billion. Euro area trade deficit narrowed. Riksbank hiked key rate again.[/R]

The European markets surrendered earlier gains and closed slightly higher on weaker than expected growth in the euro-zone area. Boards of NYSE Euronext and Deutsche Boerse agreed to merge.

U.S. stocks declined after retail sales rose less than estimated and Asian markets traded mixed.

Euro-zone finance ministers agreed to set up a permanent sovereign bailout fund for the region worth €500 billion or $675 billion. The fund will be called the European Stability Mechanism effective 2013.

The ESM will replace the current €440 billion or $594 billion European Financial Stability Facility.

Apart from euro-zone countries, the International Monetary Fund is expected to contribute around €250 billion to the permanent fund. The IMF contribution is larger than expected and will amount to be the largest contribution for any financial bailout in its history.

In Paris CAC 40 Index gained 12.12 or 0.30% to close at 4,108.74 and in Frankfurt DAX Index edged higher 3.95 or 0.05% to close at 7,400.58.

NYSE Euronext and Germany''s Deutsche Börse agreed to merge creating the world''s largest exchange group. Shareholders of Deutsche Börse will control 60% of the combined group and 40% will be controlled by the shareholders of NYSE Euronext.

Euro-zone GDP Expands, Trade Deficit Narrows

The euro-zone economy expanded 0.3% sequentially in the fourth quarter of 2010, unchanged from the third quarter, preliminary data from the Eurostat showed on Tuesday.

On an annual basis, GDP climbed 2% in the fourth quarter following the 1.9% increase in the third quarter. In 2010 as a whole, the economy of the currency bloc expanded 1.7%.

Euro-zone''s non-seasonally adjusted trade deficit narrowed to €0.5 billion in December from a revised €1.5 billion in November, Eurostat reported today.

Seasonally adjusted trade deficit declined to €2.3 billion in December from €3.2 billion in November.

German Economic Sentiment Up

The Mannheim-based Centre for European Economic Research, or ZEW, said its economic sentiment indicator that measures financial experts'' six-month expectations for Germany, climbed to 15.7 in February from 15.4 in January.

The German economy expanded 0.4% sequentially in the fourth quarter from 0.7% in the third quarter, the Federal Statistics Office said on Tuesday.

French GDP Static

The French gross domestic product rose 0.3% sequentially in the final quarter of 2010, following the 0.3% expansion in the third quarter, preliminary data from statistics office Insee showed on Tuesday.

Greek Economy Contracts

Greek economy contracted again in the fourth quarter and at the steepest pace this year, latest figures showed on Tuesday.

The seasonally adjusted gross domestic product declined 6.6% annually during the quarter compared to the revised 5.7% contraction in the third quarter, according to preliminary estimates from the Hellenic Statistics Authorit.

Riksbank Hikes Key Rate

The Swedish central bank on Tuesday decided to raise its key interest rate by a quarter percentage point to 1.50% at the end of its two-day monetary policy meeting. That was the fifth straight rate hike since July 2010 and will be effective from February 16.

Spanish Inflation Rises

Spanish inflation rose to 3.3% compared to the same period a year earlier in January, confirming preliminary figures, statistics office INE said on Tuesday. This followed a 3% increase in December and 2.3% gain in November.

The latest increase in inflation was mainly due to higher prices of housing and food and non-alcoholic beverages, the INE said.

Gainers & Losers

Air France-KLM SA declined 1.74% to €12.18 after the airline was downgraded from “buy” to “sell” by UBS.

Danone S.A. surged 3.37% to €45.43 after the French dairy giant reported a rise in profit for fiscal 2010, as sales improved across all segments and geographies with particularly strong growth in Asia.

Total sales in the year increased 14% to €17.01 billion from €14.98 billion in the previous year. Net income increased 38% to €1.87 billion from €1.36 billion in the prior year.

Electricite de France SA fell 0.30% to €31.18 after the biggest power generator stated net income in 2010 slumped 74% to €1 billion from a restated €3.9 billion in 2009.

H & M Hennes & Mauritz AB rose 0.62% to SEK 211.00 after the Swedish retail-clothing company said that total sales for the month of January grew 9% from last year, calculated in local currencies including VAT. In comparable units sales increased 1%.

UniCredit SpA soared 3.09% to €1.90 after the Italian lender’s stock was upgraded to “buy” from “sell” by Societe Generale.