European Markets Rise; Premier Foods Plunges; Nestle Gains

Devan Biswas
07 Oct, 2011
New York City

European markets gained after the central bank offered more liquidity to troubled banks and politicians voiced support for bank recapitalization. Banks and resources linked stocks led the gainers. Germany and France differ on how to access the rescue fund and Holland approved the expansion of EFSF.

[R]4:40 PM Frankfurt – European markets advanced after the central bank offered more liquidity to troubled banks and politicians voiced support for bank recapitalization. Banks and resources linked stocks led the gainers. Germany and France differ on how to access the rescue fund and Holland approved the expansion of EFSF.[/R]

European indexes gained on Friday on the hopes that politicians will follow through after the optimistic talks of bank bailout and take concrete steps in containing Greek debt crisis from spreading.

Talks of coordinated actions among various European agencies and the IMF to recapitalize banks stabilized markets for the second day in a row but markets are still awaiting concrete actions.

On Thursday, the European Central Bank also offered loans to struggling banks and extended the loan period to one year from six months. The move is also expected to provide higher liquidity to banks as the U.S. money market funds restrict lending to European banks.

The indexes rallied on the back of higher liquidity, vocal political support and the Greece getting ready to place more debt in the market next week.

However, France and Germany are at odds in how the funds set in the EFSF should be used. France wants to tap the €400 billion rescue fund to support its bank and Germany, Holland and other smaller nations are insisting that the fund should be accessed only as a last resort.

Separately, Holland approved the expansion of the European Financial Stability Facility and Malta and Slovakia are the two remaining nations that need to approve the rescue fund.

CAC 40 index increased 23.49 or 0.8% to 3,098.86 and for the week rose 3.9% and DAX 30 index added 0.8% or 44.99 to 5,690.24 and for the week gained 3.5%.

The indexes in Milan, Madrid and Athens gained more than 1% today.

Greece is schedule to raise €1 billion through the sale of six months T-bills on Tuesday, according to its debt management office PDMA. The funding will help the rollover of €2 billion debt that is maturing on October 14.

Greece completed the last sale of €1.3 billion debt that yielded 4.8% and 31% of the debt was sold to foreigners.

Stock Movers

Banks rallied after the central bank offered more liquidity and provided emergency funding to troubled banks for as long as one year.

BNP Parisbas SA increased 45 cents to €32.47, Credit Agricole SA decreased 10 cents to €5.34 and Societe Generale added 15 cents to €20.84.

Insurance companies also gained on the hopes of stronger political and policymakers’ response to contain Greek crisis.

Fondiaria SAI, the largest auto insurance provider in Italy said it will not meet its 2011 net profit target because of the write down of sovereign bonds holdings by €250 million.

Fondiaria SAI SpA declined 5 cents to 90 cents and Generali SpA decreased 7 cents to €12.35.

Aegon NV increased 4 cents to €3.28, ING Groep NV added 6 cents to €5.72 and Aviva Plc increased 35 pence to 319.50 pence.

Premier Foods Plc plunged 38% to 6.20 pence after the UK based food maker said its full year profit will be lower than anticipated by market. The company said sales declined 3.6% to 477 million pounds and is close to the limits set in its debt covenants set by lenders.

Premier Foods has plunged from its peak of more than 300 pence in February 2007 after it went on an acquisition spree using debt and purchased UK and Irish operations of Campbell Soup and RHM.

Nestle SA edged a fraction lower after Chairman Peter Brabeck confirmed that the company is still targeting between 5% and 6% a year in organic growth and said food prices will remain high and are near stabilizing at this level.

Automakers were also in focus after BMW, Mercedes, Fiat controlled Chrysler and Volkswagen reported better than expected auto sales in August in the U.S. However, auto sales in Brazil slumped in September.

Fiat Industrial SpA decreased 2% to €5.39, BMW added 2.9% to €50.34 and Daimler AG added 0.8% to €33.81.

Parmalat SpA decreased 2 cents to €1.53 and the largest dairy in Italy said it will participate in cash management program operated by its French parent Lactalis.

AS Roma SpA rose 0.002 cents to 67.7 cents after the company said its public offer for Rome’s football club will run between October 13 and November 4 after the financial regulators approved the offering.

Siemens AG increased 1.05 to €72.20 and Philips Electronics added 19 cents to €13.71.

LM Ericsson declined 12 cents to $10.19 in New York trading and the company is close to selling its stake in the mobile phone joint venture to its partner Sony Corp.

Nokia Corp in New York trading gained 1 cent to $5.93.

Hochtief AG increased 81 cents to €48.94 and Vinci SA added 35 cents to €33.35.