Portuguese, Greek Bonds Yields Rise; German Factory Orders Up

Arthi Gupta
06 Jul, 2011
New York City

The European indexes traded lower after a rating agency downgraded Portuguese bonds to below investment grade. Portugal, second nation after Greece was lowered to junk rating as debt stress mount in the peripheral euro-zone. German factory orders increased, Spanish industrial production fell in May.

[R]1:30 PM Frankfurt – The European indexes traded lower after a rating agency downgraded Portuguese bonds to below investment grade. Portugal, second nation after Greece was lowered to junk rating as debt stress mount in the peripheral euro-zone. German factory orders increased, Spanish industrial production fell in May.[/R]

World stocks edged lower after a rating agency downgraded Portugal''s credit rating to junk status.

The credit rating agency Moody’s lowered Portugal''s long-term government bond ratings to Ba2 from Baa1 and assigned a negative outlook, citing growing risks the country will require a second round of official financing as it cannot meet its deficit reduction and debt stabilization targets. The negative outlook means more downgrades are likely.

The yield on two-year Portuguese bonds increased more than 1.5 percentage points to 14.6% and the yield on ten-year bonds rose 0.5 points to 12.68%.

Portugal is the second nation after Greece in the euro-zone to receive sovereign bond status below investment grade as the prospects or bond restructuring or default mount.

Greek 2-year notes yield increased 61 basis points to 27.53% and yield on similar Irish bonds increased 1.42% to 14.229%.

The Institute of International Finance has organized a meeting of euro-zone bankers in Paris today to evolve a plan for private creditor participation in the second rescue package for Greece.

The meeting is to finalize a deal based on the French plan wherein banks will roll over 70% of the maturing Greek debt into new 30-year bonds. However, a rating agency warned that Greece''s debt rollover plan could shift the country''s sovereign ratings into ""selective default.""

In Paris CAC-40 Index declined 10.87 or 0.27% to 3,967.76 and in Frankfurt DAX index edged lower 17.13 or 0.23% to 7,422.31.

German Factory Orders Increase

Germany factory orders rose a seasonally and calendar adjusted 1.8% on a monthly basis in May, slower than the revised 2.9% increase in April, according to data from the Federal Ministry of Economy and Technology released today.

Orders increased for a second consecutive month in May.

Spanish Industrial Output Falls

Industrial production in Spain dropped for a third consecutive month in May, data from the statistics office INE showed.

After adjusting to seasonal and calendar variations, production fell 0.4% annually in May as against the 1.5% fall recorded in April.

Nippon Invests in Allianz

Japan-based Nippon Life Insurance Co. said it will invest €500 million or $724 million to buy 30-year convertible subordinated bonds to be issued by Allianz Financial II B.V., a financial unit of Allianz.

Gainers & Losers

Air Berlin Plc fell 0.48% to €3.09 after the airline said its fleet capacity utilization for June increased from 75% to 80.1% and the number of passengers flying rose 4% to 3,471,923 passengers from 3,337,061 passengers in 2010.

Credit Agricole SA slumped 3.52% to €9.98 after the French lender appointed Bernard Delpit to succeed Bertrand Badré as group finance director.

HSBC Holdings Plc declined 0.6% to 620.90 pence after the British financial services firm said it plans to eliminate 672 jobs over the next three years to improve efficiency and accelerate its growth in France.

Sanofi SA gained 0.5% to €55.64 after the French drug maker signed an exclusive worldwide research collaboration agreement and option for license with Rib-X Pharmaceuticals, Inc., a privately held developer of broad spectrum antibiotics for serious infections.

Sodexo SA rose 0.09% to €54.00 after the French multinational corporation reported consolidated total revenue for the first nine months of fiscal year 2011 rose 7.7% to €12.41 billion versus €11.52 billion in the comparable period

On-site Service Solutions revenue for the period increased 7.6% to €11.89 billion from €11.05 billion in the previous year. Motivation Solutions revenue improved 8.9% to €532 million from €489 million a year earlier.