Portugal Election Hovers European Market Sentiment

Arthi Gupta
06 Jun, 2011
New York City

The European indexes traded lower after Portugal ruling party lost the general election. Greece set to receive next tranche of the

[R]2:10 PM Frankfurt – The European indexes traded lower after Portugal ruling party lost the general election. Greece set to receive next tranche of the €110 billion bailout. Statoil divested stake in Gassled joint venture for $3.2 billion.[/R]

European markets traded lower after Portugal ruling party lost the latest general election. The loss was anticipated after the country accepted tough conditions for financial bailout from the IMF and the EU. Indexes in peripheral Euro-zone markets led the decliners in the region.

U.S. indexes futures slid on weaker-than-estimated jobs data and Asian markets fell on global economic concerns with the Japanese benchmark Nikkei average falling 1.2%. Australian stocks declined for the fifth day in a row and markets in Hong Kong fell 1.3%.

Greece is to receive early next month the next tranche of the €110 billion or $161 billion bailout, European Union and International Monetary Fund officials said on Friday after a month-long review of the country's budget accounting.

In Portugal, the Social Democrats (PSD) led by Pedro Passos Coelho won the general election by 38.6% of the vote to the Socialist Party's 28.1%. Socialist leader Jose Socrates resigned as the chief of his party following the defeat.

However, the PSD-led government is expected to bring in swinging cuts, a pre-condition for securing a €78 billion or $116 billion bailout to rescue the country from a soaring budget deficit.

The International Monetary Fund approved $224.58 million loan to Iceland under a program supported by a Stand-By Arrangement. This fifth review of economic performance will bring total disbursements to around $1.8 billion.

Investor confidence in the euro-zone declined for the third consecutive month in June, according to a survey. The Sentix investor sentiment index, an indicator of confidence around 900 investors, decreased more than estimated to 3.5 in June from 10.9 points in May.

In another report, euro area producer price inflation eased slightly in April, data from Eurostat showed today. The total industry producer prices on the domestic market excluding construction rose 6.7% annually in April, slower than March's revised 6.8% increase.

In Paris CAC-40 Index declined 29.93 or 0.77% to 3,860.70 and in Frankfurt DAX index edged lower 19.20 or 0.27% to 7,089.83.

Statoil Divests Stake in Gassled

Statoil ASA decided to divest a 24.1% direct and indirect stake in Gassled joint venture for a consideration of NOK 17.35 billion.

The buyer is Solveig Gas Norway AS, a holding company that is around 45% owned by Canada Pension Plan Investment Board, 30% by Allianz Capital Partners, a subsidiary of Allianz SE, and 25% by Infinity Investments SA, a wholly owned subsidiary of the Abu Dhabi Investment Authority.

Daimler and Rolls-Royce Hold 60% of Tognum Shares

Daimler AG and Rolls-Royce currently hold a total of 59.87% of Tognum shares through their Joint Venture Engine Holding GmbH following the expiry of the acceptance period for its public takeover offer for Tognum AG.

Gainers & Losers

Aegis Group PLC surged 6.73% to 150.70 pence after the London-based media services firm held talks with Ipsos, the French market research group, for selling its research unit Synovate for about £500 million or $821 million, the Sunday Telegraph reported.

Deutsche Lufthansa AG, the aviation company fell 1.33% to €14.48, after the International Air Transport Association lowered its outlook for 2011 airline industry profits citing high oil prices, natural disasters in Japan, and the political unrest in the Middle East and North Africa.

The international association lowered its profit estimate to $2.1 billion from $8.6 billion in March. The global industry generated profit of $10 billion in 2010.

Novartis AG gained 0.24% to $63.63 after the Swiss drug manufacturer announced a significant improvement in both recurrence-free survival and overall survival benefits of extended treatment with Glivec or imatinib, for three years compared to one year following surgery, according to its Phase III randomized trial data.