European Indexes Weak; UBS Net Drops 50%, BP Profit Down 21%

Arjun Dave
26 Jul, 2011
New York City

The European markets struggled as investors digested a string of mixed earnings. BP Plc reported sharply lower profit on a weak production outlook and the largest Swiss bank UBS said quarterly net was cut in half on revenue fall of 14%.

[R]5:40 PM Frankfurt – The European markets struggled as investors digested a string of mixed earnings. BP Plc reported sharply lower profit on a weak production outlook and the largest Swiss bank UBS said quarterly net was cut in half on revenue fall of 14%. The dollar falls to a record low against the Swiss franc.[/R]

European markets struggled as investors digested mixed earnings and rising tensions in the U.S. debt talks. UBS reported quarterly net dropped by half and BP Plc earnings declined from the previous quarter.

The bond yields continued to hover near recent highs as banks in Greece declined for the second day this week after the finalization of second bailout. Spanish and Italian bonds hovered below 6% level.

The CAC-40 index declined 0.9% or 34.69 to 3,778.28 and the DAX 30 index fell 0.4% or 25.90 to 7,318.64. The benchmark index in Greece tracking banks dropped more than 2.8%.

The benchmark index in Switzerland declined 0.8% and in Spain dropped 0.5% and in Milan fell 0.2%.

The dollar declined to the record low against the Swiss franc and fell below 80 centimes and the dollar index that tracks sixteen major currencies declined 0.5%.

Greek banks eased ahead of the debt exchange that will share losses of as much as 38 billion euros with private banks.

Piraeus Bank declined 6% and other banks in Greece fell more than 3%.

UK GDP increased 0.2% in the second quarter and the service sector expanded at 0.5%. In the first quarter the number of people in full-time employment increased to 21.3 million up 94,000 from the previous quarter.

BP Plc reported second quarter ending in June profit declined to $5.6 billion compared to a loss of $17 billion in the quarter a year ago when the oil exploration giant set aside billions of dollars to satisfy claims from the Gulf of Mexico spill.

The second quarter earnings were 21% lower than $7.1 billion in the first quarter.

The company also expects to increase oil exploration in other locations and said nine projects are expected to come on stream in 2012 and 2013. The projects are located in Angola, North Sea and the Gulf of Mexico. The company is also drilling new wells in Trinidad, Australia and Brazil.

Oil and gas production in the second quarter fell 11% to 3.43 million barrels of oil equivalent a day.

Also, UK based BG Group PLC surged 3.9% after it reported second quarter net doubled.

Anglo American PLC shot up 1% after the diamond miner DeBeers reported higher than expected net profit.

Electricite de France SA rose 1% and led the gainers in Paris based CAC-40 index afte positive comments from the broker Credit Suisse.

Switzerland based UBS reported June quarterly earnings dropped to Sfr1 billion from Sfr2 billion a year ago quarter largely on the investment banking profit decline. The profit declined in the division to Sfr376 million from Sfr1.3 billion a year ago period.

Chief executive Oswald J. Grubel also confirmed that the target of Sfr15 billion pre-tax profit by 2014 is “unlikely to be achieved” in the original time period. Revenues for the quarter dropped 14% to Sfr7.2 billion.

The bank also said it plans to cut Sfr2 billion of expenses in the next two years and cited weaker than expected demand for its investment banking services.

Net new assets flow at the bank declined to Sfr8.7 billion compared to Sfr22.3 billion in the first quarter of the year.