European Markets Lower; France Sells

Arthi Gupta
05 Jan, 2012
New York City

European markets edged lower and France raised

[R]1:45 PM Frankfurt – European markets edged lower and France raised €7.963 billion from a sale of its long-term bonds today at higher borrowing costs. The Greek Prime Minister Papademos urged unions to agree to deeper cuts.[/R]

European indexes edged lower on the volatile debt crisis as sentiment swung and sovereign bond yields rose in a lower demand for the French debt auction.

Greece''s Prime Minister Lucas Papademos warned at a meeting with union leaders that deeper cuts in incomes to reduce the country''s debt are the only way for the country to remain in the euro currency zone and to secure further funding from international lenders.

Greece will start negotiations with lenders on the €130 billion-second bailout package in mid-January.

The French Treasury today auctioned a total of €7.963 billion in long-term debt with different maturities, but borrowing costs for the 10-year debt increased. The maximum target set for the OAT sale was €8 billion.

The Treasury sold €4.02 billion of the 10-year bond at an average yield of 3.29%, up from 3.18% in the previous auction on December 1. The bid-to-cover ratio dropped to 1.64 from 3.05 in the previous auction.

The agency also raised €2.04 billion from the sale of 30-year debt, maturing in April 2041. The yield on the paper rose to 3.97% from 3.94%. Demand was 1.82 times the amount on offer, down from 2.26 previously on December 1.

The agency issued €690 million of the debt that will mature in October 2023 at an average yield of 3.50%, less than 3.63% in the previous sale on June 1. The bid-to-cover ratio, however, rose to 3.22 from 1.97.

The country also raised €1.088 billion from the sale of its debt maturing in 2035. The yield was 3.96% and demand was 2.02 times the amount on offer.

French 10-year bond yields rose two basis points to 3.33%.

The monetary policy council of the National Bank of Romania slashed the benchmark interest rate to 5.75% from 6%. The bank also decided to maintain the current levels of reserve requirement ratios in domestic and foreign credit institutions.

European Union member-states have now agreed in principle to impose the oil embargo on Iran, but added that they require more time to discuss and finalize when and how to impose the ban, reports said, citing EU diplomats.

In Paris trading, the CAC-40 Index declined 36.63 or 1.2% to 3,156.96 and in Frankfurt the DAX Index edged lower 60.05 or 1.0% to 6.051.56.

The Italian 10-year bond yield increased 13 basis points to 7.07% and the yield on Spain’s 10-year bonds rose 12 basis points to 5.55%.

Gainers & Losers

Deutsche Bank AG fell 4.4% to €28.31 after the investment bank invited potential buyers for its asset management business to put in ""indicative bids"" by the end of this week, media reports suggest.

Fiat S.p.A. rose 2.3% to €3.84 after the Italian automobile manufacturer boosted ownership interest in Chrysler Group to 58.5% from 53.5%, upon the company''s achievement of the final of three performance-related milestones.

Gerry Weber International AG gained 0.8% to €25.09 after the German company, active in the fashion and lifestyle sector reported that the total December sales of the retail segment was €22.2 million, a 30.4% increase on the previous year.

Imtech N.V. climbed 2.2% to €21.09 after the Netherlands-based technical services provider said its order book at the end of 2011 rose 12% to €5.8 billion, from last year.

Societe Generale SA slumped 4.2% to €16.30 after the French bank said it plans to cut about 1,580 jobs at its corporate and investment banking division as part of a ""voluntary departure plan.""