European Markets Rest Ahead of Bank Stress Test Data

Arthi Gupta
15 Jul, 2011
New York City

European indexes traded lower ahead of the European Banking Authority tests results later today. Italian Parliament to vote today on a

[R]3:00 PM Frankfurt – European indexes traded lower ahead of the European Banking Authority tests results later today. Italian Parliament to vote today on a €48 billion austerity package. BHP Billiton agreed to acquire U.S.-based Petrohawk for $12 billion.[/R]

U.S. indexes and Asian markets fell after Standard & Poor''s placed its ''AAA'' long-term and ''A-1+'' short-term sovereign credit ratings on the United States of America on ""CreditWatch"" with negative implications.

Analysts estimate that at least ten banks may fail the latest stress tests of European banks. Stress tests results are expected later in the evening.

Italy''s lower house of parliament is due to vote later today on an austerity budget aimed at avoiding the need for an EU rescue passage. The austerity package includes cuts of €48 billion that was approved by the Italian senate yesterday.

In the UK, in another volte-face, Rebekah Brooks, the chief executive officer of News International resigned after bowing to pressure over the phone-hacking scandals that have rocked the UK. Rupert Murdoch controlled News Corp is also looking to sell most of its print publications in the UK contrary to his denial today at a press conference.

Brooks has till today not apologized the victims of the phone hacking scandals and systemic failures of news gathering techniques at the publication.

The company said that Tom Mockridge, currently CEO of Sky Italia, will replace Brooks immediately.

In Paris CAC-40 Index declined 15.19 to 0.40% to 3,736.04 and in Frankfurt DAX Index edged lower 0.94 or 0.01% to 7,213.80. For the week, the CAC-40 Index plunged 4.55% and the DAX Index fell 1.9%.

Euro-zone Trade in Balance

First estimate of the euro-zone trade in May was in balance with rest of the world compared with deficit of €4.9 billion a year ago month. First estimate for the wider EU27 trade balance in May was €13.2 billion.

BHP Acquires Petrohawk

BHP Billiton agreed to acquire U.S. oil and natural gas producer Petrohawk for $38.75 per share in an all-cash deal of $12.1 billion and a total enterprise value of approximately $15.1 billion, including the assumption of net debt.

The transaction would provide BHP Billiton with operated positions in U.S. based shale oil resource regions of the Eagle Ford and Haynesville shales, and the Permian Basin.

Telefonica Submits Redundancy Plan

Telefonica SA, the Spanish broadband and telecommunications provider said its plan to make 6,500 staff redundant in the period 2011-2013 and the estimated cost to the company is around €2.7 billion before taxes, which will be booked as non-recurrent personnel expenses in the current fiscal year.

The impact of these measures on Telefónica''s cash generation is positive from year one and allows the company to reiterate all its shareholder remuneration commitments.

Zurich Inks Deal with Santander

Zurich Financial Services Group and Banco Santander SA entered into a long-term alliance in Latin America.

Under the terms of the transaction, Zurich would purchase a 51% stake in Santander''s life insurance, pension and general insurance operations in Brazil, Mexico, Chile, Argentina and Uruguay for $1.67 billion. Performance-based earn-outs would also be paid over the 25-year term.

Also, Zurich and Santander would establish a jointly owned, new holding company Zurich Santander Insurance America, S.L. in Madrid.

Gainers & Losers

AerCap Holdings N.V. fell 1.52% to $12.30 after the Dutch company specializing in leasing aircraft signed new lease agreements for 16 aircraft in the second quarter.

Ballast Nedam NV surged 4.47% to €13.32 after the construction and engineering company said first-half revenue declined to €608 million versus €625 million in the comparable period a year ago.

Profit for the period doubled to €4 million from €2 million in the previous year. On a per share basis, earnings per share for the half year were 0.36 euros, higher than 0.17 euros a year earlier.

Credit Suisse Group AG dropped 1.57% to Sfr30.11 after the financial services provider received a letter notifying it that it is a target of the U.S. Department of Justice investigation concerning historical private banking services provided on a cross-border basis to U.S. persons.

H & M Hennes & Mauritz AB gained 1.25% to SEK218.10 after the Swedish apparel retailer reported sales, on a comparable unit basis, declined 4% in June and total sales in local currencies, including value-added tax, rose 5% from last year, reflecting increased number of stores in operation.

RWE AG declined 0.52% to €35.65 after the German utility agreed to sell a 74.9% stake in German power transmission network Amprion GmbH to a consortium of investors for an overall enterprise value of about €1.3 billion or $1.84 billion to cut its debt.

SGS SA slumped 6.90% to Sfr 1,470 after the provider of inspection, verification and testing services reported first-half revenue edged lower to Sfr 2.345 billion compared to Sfr 2.352 billion in the prior-year period. Profit in the period dropped to Sfr246 million or 32.14 francs per share from Sfr 270 million or 35.51 francs per share in the prior year.