European Markets Rally 2%; Greece to Focus on Austerity, Privatization Plans

Arjun Dave
31 May, 2011
New York City

European markets traded higher after investors turned positive on Greek developments. The IMF and the EU regulators are expected to reach a deal with Greek government to push through austerity measures and privatization plan. Banks in Germany and France advanced.

[R]4:35 PM Frankfurt – European markets traded higher after investors turned positive on Greek developments. The IMF and the EU regulators are expected to reach a deal with Greek government to push through austerity measures and privatization plan. Banks in Germany and France advanced.[/R]

The European market indexes edged higher with the market indexes in Greece, Spain and Italy leading the region.

Greece remained the focus of bond investors as the nation hammers out agreement with the International Monetary Fund and the European Union regulators.

The sources in the European Union regulators said Greece is expected to announce austerity measures that will freeze pay of civil servants and delay new hiring for three years and cut capital expenditure plan.

In addition Greece will accelerate its privatization plan that will sell the stake in the utilities companies other government controlled assets. However, opposition party has boycotted the sale.

The International Monetary Fund is also seeking collateral from Greek government as a part of loan agreement.

The preliminary estimate of annual inflation in the euro area was 2.7% in May compared to 2.8% in April, according to the latest data released by the eurostat.

In a separate report the statistic agency said Euro-zone seasonally adjusted unemployment rate in April was flat at 9.9%, compared to March and fell from 10.2% from a year ago.

The seasonally adjusted German unemployment rate declined to 7% in May from 7.1% in April.

The ASE Composite Index added as much as 5% after Jean-Claude Juncker, the leader of European Union said Greek aid is expected to be finalized by the end of next month.

The CAC 40 index added 1.67% to 4,007.85 and DAX 30 index advanced 2% to 7,302.45.

The euro gained on positive sentiment to $1.442.

Stock Movers

Banks in Greece advanced. Eurobank Ergasias soared 7.8% and National Bank of Greece surged 9.1%.

German and French banks also closed higher on the Greek developments. Credit Agricole SA added 1.9% and Societe Generale SA gained 3%. Deutsche Bank AG increased 2.4% and Commerzbank AG added 2.1%.

Energy companies also closed higher in European trading. Total SA increased 2.7% and Royal Dutch Shell Plc gained 2.2%.

Automakers in Germany and France closed higher. Volkswagen AG added 0.9% after the company released a formal bid for MAN SE. Renault SA gained 1.9% in Paris trading.

LM Ericsson added 1.8% after the company signed a deal with Panasonic Corp to provide mobile connectivity module for laptops.

Voestalpine increased 4.4% to 34.75 euros after the Austria steelmaker said fiscal full-year profit soared fivefold to 513 million euros.

Other steelmakers gained as well. ArcelorMittal increased 1.2% to 23.15 euros and Salzgitter AG added 2.5% to 51.35 euros.