Italian Bond Auction Steadies European Markets; Uniqua Down, Repsol Up

Devan Biswas
10 Nov, 2011
New York City

European markets stabilized after Italy successfully completed the sale of 1-year note but at nearly twice the rate only five weeks ago. Market indexes across the region were generally higher. Greek Prime Minister designate Lucas Papademos reaffirmed the commitment to euro.

[R]5:00 PM Frankfurt – European markets stabilized after Italy successfully completed the sale of 1-year note but at nearly twice the rate only five weeks ago. Market indexes across the region were generally higher. Greek Prime Minister designate Lucas Papademos reaffirmed the commitment to euro.[/R]

European markets closed higher after Italian bond auction drew stronger than expected response and Greece appears to resolve its political differences. China’s exports to EU region declined 10.3% last month.

In Paris, the CAC-40 Index rose 11.81 or 0.4% to 3,086.97 and in Frankfurt the DAX Index increased 56.50 or 1% to 5,886.04.

Market indexes in Zurich declined 0.4%, in Stockholm eased 0.03%, in Athens gained 0.5%, in Madrid gained 0.3% and in Milan jumped 2.2%.

The euro rose in the early trading after Italy successfully completed the sale of €5 billion Treasury bonds that mature in 1 year at a yield of 6.09%. The auction drew enough demand and met the government target.

The interest rate on the auction was the highest since September 1997 and was sharply higher compared to the previous auction on October 3 that yielded 3.57%.

Lucas Papademos, former vice president of the European Central Bank will head the new crisis coalition government according to the Greek president’s office.

Papademos reaffirmed the commitment to euro and euro zone and said new government’s responsibility is to implementing the EU bailout conditions and austerity measures and set the early elections. The elections are expected to be set as early as February next year.

Papademos also demanded and received written guarantees from both parties to commit the implementations of austerity measures that are widely unpopular in Greece.

Yields on 10-year Italian bonds increased to 7% before falling back to 6.99% and the spread with the German bunds increased to 5.2%. German bunds declined 5 ticks to 1.75%.

Gainers & Losers

Fraport AG increased 28 cents to €45.69 after the German airport operator said it is interested in airport privatisations in Turkey and Puerto Rico.

Chief executive Stefan Schulte said today that the company is short listed in Puerto Rico airport that handles 9 million passengers and is actively looking to participate in Izmir privatisation which serves 7.5 million passengers.

EADS NV increased 69 cents to €20.66 and a statement from Daimler AG confirmed that it has agreed to sell its 7.5% stake in the company to German state controlled development bank KfW.

Daimler will still retain 7.5% stake in EADS and 15% voting right and the statement did not disclose the price at which the stake will be sold. The deal is expected to be signed before the end of the year and the sale will be completed in 2012.

Repsol YPF SA edged up 1% after Spanish oil company estimated $20 billion to develop the recently discovered Argentine Vaca Muerta shale oil gas. The company also estimated total operating and capital expenditure at its Argentine shale business at $26 a barrel.

Mondadori Editore SpA increased 2 cents to €1.40 after the publishing company controlled by Italian Prime Minister Silvio Berlusconi said nine months revenues decreased 1.4% to €1.11 billion and core earnings increased 1.5% to €104.6 million.

Net profit increased 44% to €44.1 million in the period from a year ago when the company paid one-time charges for previous year taxes.

Deutsche Bank AG decreased 4.5% to €27.25, BNP Paribas SA fell 3.9% to €30.10 and Societe Generale SA declined 5.3% to €17.75.

Intesa Sao Paolo SpA decreased 8 cents to €1.12 and UniCredit SpA decreased 6 cents to 74 cents.

Uniqa Versicherungen AG declined 1.2% to €10.25 after a rating agency Standard & Poor’s said it may lower A- long term credit rating and said it estimated losses at the insurance company on Greek bond losses.

The rating agency estimated Greek bond losses of between €250 billion to €300 billion and 2011 losses of the same amount for the group. S&P also said the company may have to raise capital to meet capital adequacy requirements.

BMW AG increased 7 cents to €56.91, Volkswagen AG decreased 0.7% to €113.80 and Daimler AG fell 65 cents to €32.97.

Siemens AG decreased 1% to €71.65 after the Germany based technology company reported fourth quarter revenue increased to €20.3 billion from €19.4 billion in the year-ago quarter.

Net income in the quarter swung to €1.23 billion or €1.33 per diluted share compared to net loss of €0.40 billion or €0.54 per share in the year ago.