European Markets Drift; Slovak Decision in Focus

Devan Biswas
11 Oct, 2011
New York City

European markets closed lower as Slovakian lawmakers debate to approve the expansion of the European rescue fund. Greece said inspectors from troika completed the their mission and approved the release of sixth tranche of aid. A Ukrainian court convicted former prime minister Tymoshenko.

[R]5:30 PM Frankfurt – European markets closed lower as Slovakian lawmakers debate to approve the expansion of the European rescue fund. Greece said inspectors from troika completed their mission and approved the release of sixth tranche of aid. A Ukrainian court convicted former prime minister Yulia Tymoshenko and sentenced for seven years.[/R]

European markets turned volatile and awaited the decision from Slovakian lawmakers to expand the rescue fund. The positive comments from European leaders lifted the market sentiment at the opening after EU set October 23 as the deadline to announce bank recapitalization plan.

Herman Van Rompuy, president of the council of European Union leaders delayed the meeting of European leaders by a week to October 23 and set that as the deadline to announce a plan to recapitalize banks and expand the power the European rescue fund.

Separately, Greece also indicated that it may take larger than expected write down of its 350 billion of sovereign debt as early as October summit.

German Chancellor Angela Merkel is targeting to write down Greek debt by 50% from the current agreed upon 21% debt reduction.

The euro edged higher against the yen and the Swiss franc in a cautious trading.

The CAC 40 index decreased 0.3% to 3153.52, the DAX index gained 0.3% to 5,865.01 and the market indexes in Switzerland added 0.2% and Greece and Milan edged down 0.2%.

Earlier, Greece said it has finalized its discussion with the troika of international lenders and inspectors are expected to wrap up their mission tomorrow. The group of inspectors said that Greece has met the conditions to receive the aid and is not expected to meet its deficit target but is likely to meet its targets next year.

However, German Finance Ministry spokesman said that the decision to release the sixth tranche of aid to Greece is not final.

Slovakia opened the discussion on the vote in the early afternoon local time and is expected to struggle to approve the expansion of the European rescue fund.

The largest opposition party said it will not support the motion today but will approve the measure in the second vote later in the week.

The ruling coalition of four parties headed by Prime Minister Iveta Radicova is expected fall today as the largest opposition party try to bring down the government.

Malta approved the expansion of the EFSF and Slovakia is the only member of the 17-nations Euro zone to ratify the measure.

A Ukrainian court sentenced former prime minister Yulia Tymoshenko to seven years in prison for abusing her office to strike a gas deal with Russia. European Union foreign policy chief Catherine Ashton said trial court justice appear to be “selective.”

Russian prime minister Vladimir Putin commented during his visit to Beijing that the ruling could put relations between two nations in Jeopardy.

Stock Movers

Credit Suisse Group AG was nearly unchanged and the Swiss based bank issued 1.25 billion covered bonds that yielded 2.9% with maturing date of October 2018.

Sweden based government controlled Vattenfall AB has initiated the sale of energy assets in Finland that could bring as much as €1 billion.

Volkswagen AG increased 97 cents to €98.40 and Daimler AG gained 48 cents to €35.85 and BMW AG gained 76 cents to €53.75.

BNP Paribas SA increased 96 cents to €33.44, Societe Generale SA added €1.10 to €21.85 and Deutsche Bank advanced 33 cents to €27.85.

Bank of Ireland completed the raising of €1.1 billion in secured term funding and said it has raised €4 billion of total term funds in the year so far.

Separately Moody’s Investors Services, a credit rating agency, cut UK bank deposit rating and said the outlook is negative.

Moody’s lowered rating from Ba1/Not-Prime with a negative outlook from Baa3/Prime-3 and said that the UK government is less likely to support the bank in the event of another financial crisis.