IMF Approves Disbursement for Greece; RWE Plunges 9%

Arthi Gupta
06 Dec, 2011
New York City

European indexes edged lower after S&P placed sovereign ratings of 15 euro area nations on watch for potential downgrades. The IMF approved

[R]1:00 PM Frankfurt – European indexes edged lower after S&P placed sovereign ratings of 15 euro area nations on watch for potential downgrades. The IMF approved €2.2 billion disbursement for Greece. The leaders of France and Germany called for stricter fiscal discipline among euro-zone members.[/R]

European markets traded lower after Standard & Poor''s on Monday placed its long-term sovereign ratings on 15 euro-zone nations on credit watch with negative implications.

S&P said its decision to put the countries, including Germany, France, the Netherlands, Austria, Finland and Luxembourg that enjoy the rating firm''s highest, triple-A rating, on CreditWatch negative was prompted by its belief that systemic stresses in the euro-zone have risen in recent weeks to the extent that they now put downward pressure on the credit standing of the euro-zone as a whole.

S&P expects to conclude its review of euro-zone sovereign ratings as soon as possible following the EU summit scheduled for December 8 and 9.

Furthermore, S&P said in a statement that ratings could be lowered one notch for Austria, Belgium, Finland, Germany, Netherlands, and Luxembourg, and two notches for the other governments if the upcoming EU summit does not deliver.

However, French Finance Minister Francois Baroin told France 3 television that the economy did not require a third round of austerity despite the Standard and Poor''s decision on Monday.

S&P has warned that it may downgrade the country by two notches from its triple-A rating.

""We do not need a third austerity plan. We don''t need additional measures,"" reports quoted the minister as saying in a television interview on Monday.

The International Monetary Fund on Monday announced the disbursement of about €2.2 billion to Greece following the completion of the fifth review of the country''s economic performance.

The latest disbursement brings total fund disbursements under the Stand-By Arrangement to about €20.3 billion.

The Stand-By Arrangement, which was approved on May 9, 2010, is part of a joint package of financing with Euro area member states amounting to €110 billion over three years.

German Chancellor Angela Merkel and French President Nicolas Sarkozy in a meeting yesterday proposed a stricter treaty that envisages tighter fiscal discipline among euro-zone members to effectively deal with the debt crisis.

Germany supported France''s stance that private sector lenders should no longer be forced to accept write-downs on the sovereign debt of other euro-zone members. Sarkozy backed Merkel''s position against the idea of the European Central Bank issuing eurobonds.

In Paris trading, the CAC-40 Index dipped 2.64 or 0.1% to 3,198.64 and in Frankfurt the DAX Index edged lower 36.64 or 0.6% to 6,068.96.

Euro-zone Economy Expands

The euro-zone economy expanded as initially estimated in the third quarter, second estimates published by Eurostat showed today.

Gross domestic product increased 0.2% sequentially, in line with the initial estimate and matched the expansion seen in the second quarter.

German Factory Orders Surge

Germany''s factory orders surged 5.2% in October reversing the 4.6% drop logged in September, the Federal Ministry of Economy and Technology reported.

Gainers & Losers

Air Berlin PLC & Co. gained 1.9% to €2.54 after Germany''s second largest airline said in November, a total of 2.26 million passengers travelled on the company''s flight route network compared to 2.51 million passengers in the year-ago period.

Finmeccanica SpA, the Italian defense and aerospace group fell 1.4% to €3.51 after a broker downgrade.

Roche Holding AG climbed 1.3% to Sfr149.30 after the pharmaceuticals maker announced the acquisition of Germany-based Verum Diagnostica GmbH, a platelet function testing company, for €11 million in cash and additional €2 million contingent consideration.

RWE AG plunged 9.1% to €27.58 after the German utility group decided to implement the previously announced capital increase to bolster its balance sheet by issuing shares equivalent to approximately 15% of its current issued share capital, with an estimated worth of approximately €2.4 billion.

Sanofi SA increased 0.4% to €51.54 after the diversified healthcare company reported positive results for once-daily lyxumia in combination with lantus in type 2 diabetes uncontrolled on oral anti-diabetics, mainly metformin.

Swiss Re dipped 0.8% to Sfr49.44 after the reinsurance company estimated its claims costs from Thailand''s severe flooding at $600 million. The company currently estimates the total insured market loss to be in the range of $8 billion to $11 billion.