Debt Worries Resurface in Europe; Wacker Chemie Swings to Profit

Arthi Gupta
16 Mar, 2011
New York City

Investors refocused on the rising debt yields in peripheral nations and mounting tensions in the Middle East and North Africa. Portugal completed 1 billion euros bonds sale at a higher yield of 4.33%. Wacker Chemie returned to profit.

[R]2:30 PM Frankfurt – Investors refocused on the rising debt yields in peripheral nations and mounting tensions in the Middle East and North Africa. Portugal completed 1 billion euros bonds sale at a higher yield of 4.33%. Wacker Chemie returned to profit.[/R]

European markets traded lower as investors focused on the sovereign debt stress in the peripheral European nations. The latest downgrade of Portuguese debt reawakened the worries that the bailout cost of European sovereign debt may increase.

Portugal completed the sale of one billion euros at 4.33% rate compared to 4.057% rate it paid on March 2. The rising interest cost was accompanied by a sharp fall in demand to 2.2 times from 3.1 times of the debt offered.

Investors have been worried that the small nation with little exports may not be able to aid banks and government controlled companies as the growth lags and budget deficit is expected to increase.

In addition, rising tensions in the Middle East and North Africa also played a role in market jitters. Violence gained momentum in Bahrain and Iran denounced the presence of Saudi Army in the small nation on the edge of Saudi Arabia.

A two-day summit of G8 foreign ministers ended in Paris on Tuesday, with the world powers failing to agree on a joint French-British proposal to enforce a no-fly-zone over Libya. However, the G8 ministers urged the United Nations to mount pressure on Qaddafi to step down from power using other means, including economic sanctions.

Reports suggest that Gaddafi’s loyalists appeared to gain the upper hand against rebels in at least one coastal city of the country.

By Tuesday afternoon, the pro-Gaddafi forces had surrounded the city and taken control of the road to Benghazi to the east, cutting off the rebels’ main line of retreat, The Associated Press reported, citing rebel sources.

However, the benchmark index in Japan rebounded 5.6% as investors focused in the rebuilding efforts and nuclear radiation leak worries were on the back burner for now.

The market gains in Tokyo were trimmed after a fire was reported at the troubled Fukushima Dai-Ichi nuclear reactor building’s unit 4.

Workers had to be evacuated from the stricken Fukushima Dai-Ichi nuclear plant after a fire at reactor No.4 sent radiation levels soaring. The fire at the reactor was the second in two days and followed a series of explosions at the plant‘s other reactors.

Radiation doses as high as 10,000 times normal background radiation had been briefly detected inside the plant.

Japanese Cabinet Secretary Yukio Edano told a news briefing that workers at the plant had been withdrawn following the sudden rise in radiation levels.

“Workers cannot carry out even minimal work at the plant now. Because of the radiation risk, we are on standby,"" he said.

The Bank of Japan offered $43 billion or 3.5 trillion yen on Wednesday, reports said. The central bank has injected around 55.6 trillion yen since Monday.

In Paris CAC-40 index declined 6.93 or 0.18% to 3,773.92 and in Frankfurt DAX index edged higher 48.16 or 0.72% to 6,695.82.

Moody''s Lowers Portugal''s Rating

Rating agency Moody''s Investors Service on Tuesday lowered Portugal''s long-term government bond ratings to A3 from A1 and assigned a negative outlook.

Moody''s said the key driver to the rating action was the uncertainty over how quickly Portugal''s task of improving its competitiveness and reducing its external imbalances can be achieved against an unfavorable background.

Gainers & Losers

Drägerwerk AG & Co. KGaA surged 4.15% to €59.95 after the provider of medical and safety technology solutions reported fiscal year 2010 net rose 14% to €2.18 billion from €1.91 billion a year ago.

Net profit for the year 2010 surged 222% to €104.8 million from €32.5 million a year ago. Earnings per preferred share grew to 6.25 euros from 1.20 euros last year.

Gildemeister AG soared 4.88% to €15.03 after the company engaged in the production of cutting machine tools said that it would increase its share capital by about 10% by issuing new bearer shares of common stock without par value against cash contributions.

Kuoni Reisen Holding AG climbed 0.89% to Sfr423.75 after the Switzerland-based tourist travel corporation said that it received notification from Travelport that its lenders have consented to the disposal of Gullivers Travel Associates.

Munich Re climbed 1.90% to €107.30 after the worries of nuclear meltdown in Japan receded for now.

Transgene S.A plunged 4.83% to €11.23 after the France-based biopharmaceutical company reported net loss widened 25.3% to €34.2 million in 2010 compared to a loss of €27.3 million in the prior year, principally due to growth in research and development expenses.

Volvo AB increased 1.67% to SEK 100.20 after the Swedish truck maker appointed Olof Persson, currently President of Volvo Construction Equipment, as the new President and Chief Executive Officer of Volvo.

The company said separately that total truck deliveries in February, including Volvo Trucks, Mack, Renault Trucks, UD Trucks and Eicher, increased 49% to 17,862 vehicles from 11,955 vehicles in the prior year.

Wacker Chemie AG slumped 4.22% to €140.70 after the Germany''s specialty chemical products company reported full-year 2010 consolidated sales grew 27.7% to €4.75 billion from €3.72 billion in the preceding year. For the full year, net income was €497 million or 9.88 euros per share compared to a loss of €74.5 million or 1.43 euros per share a year earlier.

Zodiac Aerospace SA rose 1.46% to €47.65 after the aerospace components group said first-half revenue rose 36% to €1.31 billion from €966 million a year earlier.