Contagion Fears Drive European Yields Higher; ThyssenKrupp Plunges 5%

Arthi Gupta
07 Jul, 2011
New York City

The European indexes gained after Germany''s industrial output climbed more than estimated in May. The French Finance Minister Francois Baroin hinted that the second bailout for Greece would be finalized by September. Rating agency lowered the government-guaranteed debt of four Portuguese banks.

[R]1:00 PM Frankfurt – The European indexes gained after Germany''s industrial output climbed more than estimated in May. The French Finance Minister Francois Baroin hinted that the second bailout for Greece would be finalized by September. Rating agency lowered the government-guaranteed debt of four Portuguese banks.[/R]

European markets are in holding pattern ahead of key lending rate decisions from the central banks in the Europe and UK. Yields on Portuguese bonds yields were steady but on Italian and Spanish bonds increased.

Portuguese bond yields stabilized with 2-year paper yielding 17.81% and 10-year paper yielding 14%.

Italian 10-year bond yields spreads to German bonds increased to 224 basis points as the Italian yield increased to 5.2%. The debt contagion fears are driving the yields of several nations in the euro-zone.

Investors are focused on interest rate decisions from the Bank of England and European Central Bank later today. The European Central Bank is expected to hike the rate by 25 basis points to 1.5% after raising it by 25 basis points in April.

The next bailout plan for Greece should ""probably"" be ready in September, France''s new finance minister, Francois Baroin, said on Wednesday.

Rating agency Moody''s Investors Service lowered the government-guaranteed debt of four Portuguese banks. Rating agencies have been slow and lagged market perception.

Moody’s lowered its debt rating for Caixa Geral de Depositos and Banco Espirito Santo by three notches to Ba1 from Baa1 with negative outlooks and they are on review for further downgrade. Also, Moody’s cut Banco Comercial Portugues and Banco Internacional do Funchal ratings by four notches to Ba2 from Baa1 with a negative outlook.

Emerging market growth slowed to its weakest level in two years in the second quarter, according to a report released by Markit Economics today.

The HSBC emerging market index fell to 54.2 in the second quarter from 55 in the first quarter.

In Paris CAC-40 Index gained 16.27 or 0.42% to 3,977.61 and in Frankfurt DAX index edged higher 30.82 or 0.41% to 7,462.01.

German Industrial Production Rises

Germany''s industrial output climbed more than estimated in May, according to data released by the Federal Ministry of Economy and Technology today.

The seasonally adjusted production rose 1.2% on a monthly basis in May after the 0.8% decline in April.

TeliaSonera Inks M2M Cooperation Agreement

TeliaSonera signed the cooperation agreement with France Telecom-Orange and Deutsche Telekom to increase the quality of service and interoperability for machine-to-machine communications.

Gainers & Losers

Evotec AG surged 4.76% to €2.73 after the drug discovery and development company said it entered into a three year integrated drug discovery collaboration with UCB to identify small molecule modulators of priority biological targets.

Fielmann AG dipped 0.13% to €77.79 after the optical products maker said first-half consolidated sales grew 7% to €522 million from €487.4 million. Pre-tax profit in the period advanced 9.1% to about €86 million from €78.8 million reported for the same period last year.

Merck KGaA rose 1.04% to €76.43 after the German pharmaceutical and chemicals maker said its Merck Serono division appointed Belén Garijo as Chief Operating Officer of the company from September 1.

RHJ International S.A. gained 2.1% to €4.90 after the Belgium-based diversified holding company said it is in is exclusive negotiations with Deutsche Bank to acquire BHF-Bank, through its wholly owned subsidiary Kleinwort Benson Group.

Stolt-Nielsen Limited climbed 1.575% to NOK 129.000 after the Norwegian-Bermudean shipping and seafood company said second quarter revenues rose 15.4% to $528 million versus $457.7 million in the previous year. Net profit in the quarter climbed 18% to $32.4 million compared to $27.5 million last year. On a per share basis, profit grew to $0.55 from $0.46 a year ago.

ThyssenKrupp AG plunged 5.18% to €32.95 after German steelmaker said it plans to raise around €1.7 billion through the placing of 49.5 million treasury shares or 9.6% of outstanding shares to reduce its debt.