Germany Approves Euro Fund Expansion; Italy

Arthi Gupta
29 Sep, 2011
New York City

The European indexes gained after German lawmakers agreed to expand the bailout fund. Italy sold

[R]2:00 PM Frankfurt – The European indexes gained after German lawmakers agreed to expand the bailout fund. Italy sold €7.9 billion of bonds at higher yield. German unemployment decreased to 6.9% in September. Nokia planned to slash 3,500 jobs to align its workforce and operations.[/R]

The German Parliament voted in favor of the strengthened euro-zone bailout fund, the EFSF.

The proposal for the expansion of the European Financial Stability Facility was passed with an overwhelming majority in a vote held in the lower house of the German parliament Bundestag with 523 votes in favor, 85 against and 3 abstentions.

The Bundestag approval paves way for raising Germany''s contribution to the EFSF from €123 billion to €211 billion.

Germany became the 10th euro area nation to approve the reforms to the euro rescue fund.

Italy sold €7.9 billion in bonds today as borrowing costs rose nearly 100 basis points from the previous auction.

The Italian Treasury sold €3.14 billion of five-year bonds at a higher yield of 4.68% compared with a yield of 3.87% at the last auction on Aug. 30. Demand was 1.36 times the amount sold compared with 1.32 times at the last sale.

The Treasury also sold €2.47 billion of bonds due in 2022 at a higher yield of 5.86% versus 5.22% at the last auction on August 30.

The Treasury also auctioned €1.3 billion of 2021 bonds to yield 5.49% and €926 million in floating-rate 2015 bonds to yield 5.63%.

Spain Delays Lottery IPO

The Spanish government decided to postpone the initial public offering of its lottery operator. The government was planning to sell 30% stake in of Sociedad Estatal de Loterias y Apuestas del Estado. Finance Minister Elena Salgado told Cadena Ser radio station that the banks warned that there is a risk of final proceeding falling short of €20.8 billion.

The IPO was part of a series of asset sales that was originally framed to cut its debt.

In Paris, CAC-40 Index gained 5.17 or 0.2% to 3,000.81 and in Frankfurt DAX Index edged lower 1.04 or 0.1% to 5,77.50.

Euro-zone Confidence Declines

Euro-zone economic confidence declined more than estimated in September, survey data from the European Commission showed. The economic sentiment index was 95 in September, down from 98.4 in August.

German Jobless Rate Drops

German unemployment decreased notably in September. The number of unemployed fell by seasonally adjusted 26,000 in September after declining by revised 9,000 in August.

The jobless rate fell to 6.9% in September from 7% in August and from 8% a year ago month. That is the lowest unemployment rate since the country''s reunification.

Nokia Plans Jobs Cut

Nokia, the Finnish mobile phone maker said it will cut around 3,500 jobs by end of 2012, including 1,300 staff in the newly created Location & Commerce business unit and plans to close a manufacturing facility in Romania.

These restructuring actions are in addition to about 4,000 job cuts announced in April.

Gainers & Losers

Aegon N.V. rose 0.9% to €3.09 after the Dutch insurer said it is restructuring its business in The Netherlands to accelerate its prior announced strategic plans, resulting in about 300 job cuts. The restructuring in The Netherlands would cost the company about €60 million in total.

Electricite de France SA dipped 0.3% to €21.76 after the French power generator said it had ordered 44 steam generators for its nuclear power plants. Areva and Westinghouse are to undertake the supply of 32 and 12 generators respectively, for a total value in excess of €1.5 billion.

H & M Hennes & Mauritz AB surged 4.8% to SEK 205.20 after the Swedish apparel retailer said third quarter sales excluding VAT marginally increased to SEK 26.91 billion from SEK 26.89 billion in the previous year. Profit after tax fell 15.3% to SEK 3.59 billion or SEK 2.17 per share versus SEK 4.24 billion or SEK 2.56 per share in the prior year.

Roche Holding AG climbed 0.8% to Sfr145.70 after the Swiss pharmaceuticals and diagnostics company said it has received the U.S. FDA approval for its Accu-Chek Aviva Plus test system for patient self-monitoring of blood glucose.

Swedish Automobile NV soared 5.8% to €1.09 after the Netherlands-based company that manufactures high-end sports cars agreed to sell the Spyker sportscar business to U.S.-based private equity firm North Street Capital LP, the Financial Times reported without disclosing the terms of the deal.

Vossloh AG plunged 7.4% to €78.66 after the German rail infrastructure provider estimates sales for fiscal year 2011 to be around €1.2 billion, lower than previous forecast of €1.25 billion. Earnings before interest and tax are estimated between €90 million and €100 million for 2011, lower than €120 million to €130 million expected earlier.