Spain's Rating Lowered, Berlusconi Survives; Clariant , Syngenta Rise

Devan Biswas
14 Oct, 2011
New York City

European markets advanced as G20 leaders urge European leaders to expedite the bank recapitalization plan. A credit rating agency lowered its views on the Spanish debt and lowered the rating for the third time in three years. Italian Prime Minister Silvio Berlusconi won a confidence vote.

[R]4:00 PM Frankfurt – European markets advanced as G20 leaders urge European leaders to expedite the bank recapitalization plan. A credit rating agency lowered its views on the Spanish debt and lowered the rating for the third time in three years. Italian Prime Minister Silvio Berlusconi won a confidence vote.[/R]

European markets rebounded on the hopes that the regional leaders are close to finalizing the plan to recapitalize banks.

Though the plan to recapitalize banks is taking shape before the crucial meeting on October 23 division among the 17-member euro zone is deepening.

Germany, Holland, Finland and Slovakia are on one side demanding that the €440 billion expanded rescue fund should be used as a last resort and France, Spain and Portugal and Greece on the other side asking to tap in the facility immediately.

European leaders are slowly corralling a consensus to ask banks take more than 21% loss in the Greek bonds and banks are required to recapitalize as early as next month.

The meeting of G20 nations in Paris today also shot down the proposal to increase the IMF capital after U.S. Treasury Secretary rejected the plan and said “They have substantial resources that are uncommitted.”

Separately, a rating agency S&P lowered credit rating of Spain by a notch and cited weakening economic conditions and stalled labor reforms. Spain’s rating was lowered third time in three years.

The rating action follows a downgrade a week by Fitch and two months after Moody’s placed the country’s debt on a watch list with a negative outlook.

Spanish bond yields gained 10 basis points to 5.26% and markets focused on the government deficit target before the November election. The government is facing a difficult time to meet its deficit target of 6% this year as unemployment hovers near 21%.

Slovakia, the second poorest member of the euro zone, ratified the expansion of the European Financial Stability Facility o Thursday after the opposition party agreed with the ruling party to hold election next March.

The CAC 40 index increased 1.1% to 3,222.64, the DAX index rose 1.1% to 5,983.28 and the market indexes in Switzerland and UK gained 1% and in Greece rose 2% and in Italy added 2.6%.

Italian markets soared after Prime Minister Silvio Berlusconi won the vote of confidence by 316 to 301. The today’s vote takes Berlusconi off the hook and allows the government to proceed routine budgetary measures but internal dissent in the governing coalition is growing.

Several ministers and members of parliament stayed away from voting to put pressure on prime minister.

Italian bond yield edged slightly lower to 5.33% for 10-year bonds and the euro edged a fraction higher to $1.384 and to 106.96 yen.

Stock Movers

Volkswagen AG increased 2.8% to €103.90 and Daimler AG rose €1.09 to €37.22 and BMW AG rose €2.12 to €54.25.

UniCredit SpA increased 5.5% to 98 cents, Banco Popolare increased 3 to €1.26 and Intesa Sanpaolo SpA increased 3% to €1.32.

BNP Paribas SA decreased 1.5% to €32.83, Societe Generale SA fell €0.12 to €21.48 and Deutsche Bank increased 0.6% to €27.82.

ASML Holding N.V. increased 1% to €28.79 and a day ago the semiconductor equipment maker said third quarter net income was €355 million.

Michelin SCA increased 2.6% to €50.04, Fiat Industrial SpA rose 30 cents to €5.93 and Peugeot SA AG increased 3.2% to €18.10.

Carrefour SA increased 2.2% to €17.22 after the operator of hypermarkets raised €500 million in a bond sale of 5.25% yield.

Sulzer AG declined 8% to Sfr 95.10 after the machinery maker said orders are likely to be lower than expected in the current year as customers wait out the economic uncertainty.

Syngenta AG added 2% to Sfr 270 after the agricultural chemicals maker reported third quarter sales of $2.7 billion.

Clariant AG increased 3.6% to Sfr9.75 after the chemicals maker said it raised €365 million through the sale of debt of 3-year maturity.