Spain Extends Deadline for Cajas; German Wholesale Inflation Rises

Arthi Gupta
18 Feb, 2011
New York City

The European indexes fell and Spain bowed to the pressures from savings banks. A rating agency lowered German banks subordinated debt and Euro-zone consumer confidence improved. German factory price inflation rose to a 2-year high. Spain offered more time to ailing savings banks to raise capital.

[R]4:00 PM Frankfurt – The European indexes fell and Spain bowed to the pressures from savings banks. A rating agency lowered German banks' subordinated debt and Euro-zone consumer confidence improved. German factory price inflation rose to a 2-year high. Spain offered more time to ailing savings banks to raise capital.[/R]

European indexes surrendered early gains as unrest in the Middle East spreads to oil producing nations. Worries about Portugal finances also grow as German finance minister showed a willingness to extend financial help to Portugal.

G20 finance ministers and central bankers are expected to meet in Paris for a 2-day meeting to discuss rising worldwide inflation and persistent imbalances in world economies.

Spain Extends Deadline for Cajas

Spain today granted more time to ailing savings bank in the country to raise capital and sell assets. Finance Minister Elena Salgado said at a press conference that government by a decree approved the extended plan and also required cajas to meet stricter core capital requirement of 8% and 10% for those banks that are neither listed on the stock market nor have found private investors for 20% stake in banks.

In addition, the government said that the state restructuring fund known as Frob will only provide emergency lending to commercial banks and not to savings banks or as they are known in Spain as cajas.

The People's Bank of China on Friday raised commercial banks' reserve requirement ratio by 50 basis points. This is the second hike in reserves this year effective from February 24, the central bank said in a statement.

Norges Bank Governor Oystein Olsen said in a speech in Oslo on Thursday that low inflation prospects imply a low interest rate, but it is risky to keep the policy rate low for a long time. A persistently low interest rate can pose a challenge in an economy where there is a strong willingness to borrow and property prices are rising, he noted.

In Paris CAC 40 Index gained 0.62 or 0.01% to close at 4,152.93 and in Frankfurt DAX Index edged higher 12.85 or 0.17% to close at 7,418.36. For the week, the CAC Index surged 2.58%.

Euro-zone Consumer Confidence Improves

Euro-zone consumer confidence indicator rose to minus 9.9 in February from minus 11.2 in January, according to a flash report from the European Commission.

The confidence indicator for the European Union member states remained unchanged at minus 12.4 in February compared to minus 12.6 in January.

Moody's Lowers German Banks' Subordinated Debt

Moody's downgraded the ratings of German banks' subordinated debt securities worth €24 billion. Moody's said the move was taken on the basis of an expectation that introduction of the German Bank Restructuring Act will increase the risk of losses imposed on subordinated debt outside of liquidation.

Commerzbank AG, Deutsche Bank AG, UniCredit Bank AG and Bayerische Landesbank are among the banks affected.

Germany Factory Price Inflation, Leading Index Rises

German producer price inflation rose to 5.7% annually in January from 5.3% in December, the Federal Statistics Office said today. The annual increase was largely driven by higher energy prices.

On a monthly comparison, the producer price index climbed 1.2% in January as against the 0.7% increase in December.

The Conference Board said on Friday that its leading index for Germany rose 0.4% to 106.2 in December from November.

Strong positive contributions from the yield spread, stock prices, and new orders for investment goods more than offset the declines in consumer confidence and new orders in residential construction, the Conference Board said.

The coincident index, a measure of current economic activity, climbed 0.2% on a monthly basis in December to 104.7.

French Manufacturing Business Confidence Drops

French manufacturing business confidence indicator fell to 106 in February from 108 in January, survey data from Insee showed on Friday.

Dutch Consumer Confidence Improves

Dutch consumer confidence index was at minus 5 in February from minus 8 in January, a monthly survey conducted by the Central Bureau of Statistics showed today.

Greece HICP Inflation Eases

EU harmonized annual inflation in Greece dropped to 4.9% in January from 5.2% in December, the Hellenic Statistics Authority said today. During the same period of last year, EU harmonized inflation was 2.3%.

Lafarge Forms JV with Anglo American

Anglo American plc announced a 50:50 joint venture with French cement giant Lafarge SA to combine their cement, aggregates, ready-mixed concrete, asphalt and contracting businesses in the UK and create a leading UK construction materials company. These businesses comprise Tarmac Limited and other UK businesses.

Gainers & Losers

BTS Group AB dipped 0.38% to SEK 64.75 after the learning and development consultant reported fourth quarter profit rose 21% to SEK 18.07 million or SEK 1.00 per share from SEK 14.94 million or SEK 0.83 per share in the prior-year quarter. Net turnover rose 23.3% to SEK 200.27 million from SEK 162.36 million in the comparable period last year.

Elmos Semiconductor AG surged 7.89% to €11.08 after the company operating in the semiconductors sector reported net income for the fourth quarter surged 329% to €7.3 million compared to €1.7 million in the year-ago quarter.

Bayer AG rose 0.51% to €56.87 and media speculation suggested that the drug and chemical maker aims to invest around €3 billion in research and development.

Infineon Technologies AG gained 1.26% to €8.04 after the chipmaker’s supervisory board appointed Wolfgang Mayrhuber as its new chairman.

Koninklijke Philips Electronics N.V. climbed 1.54% to €23.81.

Lafarge S.A. surged 4.16% to €47.91 after the French building materials company reported fourth quarter said sales increased 9% to €3.96 billion from €3.64 billion last year. Net income generated in the quarter was €62 million or 0.22 euros per share compared with a loss of €38 million or 0.13 euros per share a year earlier, mainly reflecting higher sales volumes and favorable foreign exchange.