European Indexes Rebound; Italian Debt Auction at Record Yield

Devan Biswas
25 Nov, 2011
New York City

European indexes rebounded after falling for six days in a row. Italy completed

[R]5:30 PM Frankfurt – European indexes rebounded after falling for six days in a row. Italy completed €8 billion of 6-month bills that yielded 6.504%, higher than 3.5% yield a month ago. Italy plans to raise €440 billion in 2012.[/R]

European markets rebounded after declining for six days in a row but bond yields hovered near the record highs.

Italian Prime Minister Mario Monti said to his Cabinet after meeting with German Chancellor Angela Merkel and French President Nicholas Sarkozy said that two leaders understand that the euro can unravel of Italy defaults on its obligations.

In Paris trading, the CAC-40 index gained 41.87 or 1.5% to 2,864.12 and in Frankfurt the DAX index edged higher 79.01 or 1.5% to 5,507.12.

For the week, the CAC-40 index dropped 4.7% and DAX 30 plunged 5.3%.

The benchmark index in Sweden, Switzerland and Athens gained over 1% and in Italy added 0.7% and in Spain edged up 0.3%.

The euro continued to decline for the third day and dropped 0.9% to $1.323, a two-month low.

The Italian Treasury sold €8 billion of 6-month bills that yielded 6.504%, higher than 3.5% yield a month ago. Italy also sold €2 billion zero coupon CTZ bonds at a record yield of 7.8%, up from 4.6% from the previous sale.

Spanish 10-year bonds yields rose 6 basis points to 6.68%, French 10-year yields declined six basis points to 3.63% and Italian yields rose 19 basis points to 7.3%.

Moody’s lowered Hungary’s sovereign long term debt rating to below investment grade and to the highest level of junk rating. Hungary lost its investment grade rating for the first time in 15 years.

Gainers & Losers

Banks in Austria declined after Hungary lost its investment grade rating.

Erste Group Bank AG declined 2.6% to 10.72 and Raiffeisen Bank International AG fell 3% to €14.56 and the bank said yesterday that it may withdraw from some of the central European nations.

Raiffeisen Bank International AG said yesterday third quarter consolidated profit declined 58.2% to €130 million versus €311 million last year on the rise in impairment losses provision and the €152 million loss in Hungary.

Swedish banks declined as much as 2% after the Swedish financial authority issued a joint statement that banks will be required to increase capital to meet international standards.

SEB AB declined 2%, Swedbank AB dropped 1.8% and Nordea Bank fell 3%.

The banks will be required to increase common equity Tier 1 capital to 10% of the risk weighted assets from January 2013 and it will be increased to 12% in 2015.

Blacks Leisure dropped 12% to 3.85 pence after the outdoor clothing retailer said its full-year net will be lower than expected. The retailer said first-half to August 27 pre-tax loss more than doubled.

Thomas Cook Group Plc rebounded 8.7% to 17.70 pence after a media report suggested that the tour operator is close to arranging 100 million loans with a syndicate of £17 banks.