European Indexes Reverse Losses; Germany Resists Euro Bonds

Arthi Gupta
22 Aug, 2011
New York City

European indexes inched higher as NATO led aggression in Libya captured Tripoli. German Chancellor Angela Merkel rejected the idea of euro bonds as a solution to the sovereign debt crisis. Spain unveiled additional austerity measures. Skype agreed to buy GroupMe.

[R]1:00 PM Frankfurt – European indexes inched higher as NATO led aggression in Libya captured Tripoli. German Chancellor Angela Merkel rejected the idea of euro bonds as a solution to the sovereign debt crisis. Spain unveiled additional austerity measures. Skype agreed to buy GroupMe.[/R]

European indexes opened higher on the first day of trading this week but as leaders in the region sounded discordant voices. The euro-zone struggles to contain the debt contagion from spreading to the core nations and banks brace for more losses linked to sovereign bonds.

Oil exploration companies edged higher on news that NATO led aggression in Libya seized control of Tripoli early on Monday and took two of Colonel Moammar Qadhafi''s sons into custody.

German Chancellor Angela Merkel in an interview to public broadcaster ZDF on Sunday reiterated her stance saying that euro bonds are not a solution to the European debt crisis.

Merkel said euro bonds are ""exactly the wrong answer"" to the ongoing crisis, adding that they would lead to a ""debt union and not a stability union"". She also said there are no signs of a recession in Germany.

However, the European Commission plans to move ahead with the euro bond proposal despite opposition from Germany and France, according to published comments of Economic and Monetary Affairs Commissioner Olli Rehn on Friday.

Rehn said euro bonds would aim to strengthen fiscal discipline and increase stability in the euro area through markets.

Separately, German Finance Minister Wolfgang Schaeuble said in an interview with Deutschlandfunk radio that there are no signs of a recession in Germany and the euro is stable despite the recent crisis.

Schaeuble further reiterated that the German economy is strong and estimated to grow 3% this year.

In yet another effort for cost cutting, Spain unveiled another round of austerity measures that include lowering value-added tax on purchases of new homes to 4% from 8% for the transactions entered until the end of this year.

Also, about €2.5 billion revenue is estimated to be generated by bringing forward corporate tax payments. Further, the government planned to save nearly €2.4 billion in healthcare spending annually.

In Paris CAC-40 Index soared 45.60 to 1.51% to 3,062.59 and in Frankfurt DAX Index gained 27.04 or 0.49% to 5,507.04.

Skype Buys GroupMe

Skype Technologies SA, the Internet communications company agreed to acquire New York-based group messaging service start-up GroupMe. The terms of the deal were not disclosed by the companies.

Electrolux Acquires CTI

Electrolux will acquire Sigdo Koppers’ controlling stake in Chile-based Compañia Tecno Industrial S.A, as a part of its strategy to grow in emerging markets.

Under the terms of the agreement, Electrolux will commence a cash tender offer to acquire 100% of the outstanding shares in CTI at a price of 34.87 Chilean Pesos per share with Sigdo Koppers and certain associated parties committed to tender their 64% stake.

The acquisition makes Electrolux the largest supplier of appliances in Chile and Argentina, and enhances the company’s position as a leading appliance maker in the fast-growing Latin American market.

Gainers & Losers

Cfc Industriebeteiligungen GmbH & Co Kgaa surged 6.36% to €1.17 after the private equity firm said first-half group sales grew 9% to €41.9 million compared with last year. Net loss during the period was €1.1 million.

Jyske Bank A/S plunged 7.03% to DKK 146.70 after the Danish lender reported second quarter net income of DKK 88 million.

Sixt AG soared 5.62% to €14.10 after the Germany-based company, engaged in the provision of mobility services stated second quarter revenues declined 0.6% to €391.4 million from €393.6 million in the prior-year quarter. Consolidated profit before taxes rose 46.3% to €39.2 million, from €26.8 million last year.

Software AG gained 0.48% to €28.23.