European Indexes Rise; ECB, Germany Negotiate on Greece

Arthi Gupta
14 Jun, 2011
New York City

The European indexes advanced tracking gains in Asia and better-than-estimated industrial output from China. European finance ministers are set to meet today to discuss the next bailout package for Greece. Spain successfully auctioned

[R]2:00 PM Frankfurt – The European indexes advanced tracking gains in Asia and better-than-estimated industrial output from China. European finance ministers are set to meet today to discuss the next bailout package for Greece. Spain successfully auctioned €5.42 billion in short term debt.[/R]

World indexes traded higher after strong industrial output data from China and markets in Europe edged higher as European leaders haggle on Greek bailout conditions.

European finance ministers are due to hold an emergency meeting in Brussels this afternoon to discuss the next phase in the bailout of Greece. The main focus will be a disagreement between the European Central Bank and Germany.

Most private banks have sold their Greek bonds holdings to the European Central Bank and any talks of Greek debt restructuring will generate significant losses for the central bank.

Separately, Standard & Poor''s on Monday downgraded the country''s sovereign rating by three notches to the lowest grade, citing possibility of one or more defaults over the next twelve months.

The rating agency also sees risk rising on the execution side of Greece''s EU/IMF borrowing program.

The long-term sovereign credit ratings on Greece were lowered to ''CCC'' from ''B'' with the outlook negative.

In Paris CAC-40 Index gained 31.77 or 0.85% to 3,839.37 and in Frankfurt DAX index edged higher 102.66 or 1.45% to 7,187.80.

The 10-year bond yields for Portugal hovered at the highest level since the creation of the euro and similar yields on the Greek bonds soared to 16.55%.

The Spanish Treasury today auctioned a total of €5.42 billion in short term debt and €3.96 billion of 12-month bill compared to €4.27 billion in the last auction.

The interest paid on this issue was 2.695%, higher than the 2.546% paid at the previous auction. The bid to cover ratio was strong at 2.85 times demand, versus the 2.50 ratio in the last auction.

In Asia, Chinese industrial production rose 13.3% annually in May as against the 13.5% increase in April. Separately, inflation rose to 5.5% in May from 5.3% in April, the National Statistics Bureau said. The inflation rate was the highest since July 2008.

However, the Chinese central bank announced a hike in reserve requirement ratio for the sixth time this year to contain inflation. The central bank lifted the reserve ratio by 50 basis points, effective from June 20.

The Bank of Japan decided to lend up to 500 billion yen to earth quake hit region wherein each financial institution could borrow up to 50 billion yen at an interest rate of 0.1% per annum for a maximum duration of four years.

Separately, data showed that industrial production in the country grew 1.6% on a monthly basis in April.

Gainers & Losers

Cap Gemini SA gained 2.23% to €38.26 after the France-based company engaged in the provision of consulting, outsourcing, technology and local professional services entered into exclusive negotiations with the funds managed by Apax Partners and the Prosodie management team to acquire the multi-channel services operator Prosodie.

Nokia Corp. fell 2.86% to $6.11 after the Finland-based mobile phone maker said it inked a patent license agreement with Apple Inc., settling all patent litigation between the two companies.

TeliaSonera AB fell 0.25% to SEK 47.02 after the Swedish telecommunications firm reiterated its sales outlook for 2011. It still expects growth in net sales in local currencies and excluding acquisitions to be around 3%.