European Indexes Jump 2.4%; UniCredit Offering Struggles

Arthi Gupta
10 Jan, 2012
New York City

European markets traded higher on the positive earnings outlook in the resource sector but UniCredit SpA struggled to raise capital. The Netherlands raised

[R]1:30 PM Frankfurt – European markets traded higher on the positive earnings outlook in the resource sector but UniCredit SpA struggled to raise capital. The Netherlands raised €3.1 billion in bond sale. Air Products agreed to sell its homecare business to Linde AG for €590 million.[/R]

The benchmark indexes in Europe soared 2.4% led by miners as political leaders make one more attempt to finalize terms of lending for Greece. At least by the morning trading, stocks were higher on the optimism after the aluminium maker Alcoa Inc met earnings expectations.

German Chancellor Angela Merkel and French President Nicolas Sarkozy met in Berlin yesterday indicating that they have made progress on an agreement to implement new budget rules for the euro-zone.

However, they warned Greece would not receive the next tranche of the bailout money unless it moves forward with promised structural changes and deeper spending cuts to avoid a disorderly default.

The German Chancellor is scheduled to have talks with the International Monetary Fund Managing Director Christine Lagarde in Berlin today.

In Paris trading, the CAC-40 Index soared 73.96 or 2.4% to 3,201.65 and in Frankfurt the DAX Index edged higher 150.08 or 2.5% to 6.166.99.

The Italian 10-year bond yield fell 4 basis points to 7.12%. Italy is scheduled to sell €8.5 billion sale of 10-year bonds today. The country must raise €440 billion in debt in 2012 most of will cover the rollover of the maturing debt at higher interest rates.

The Dutch State Treasury Agency placed €3.105 billion of 0.75% bonds maturing in April 2015, at an average yield of 0.853%. The agency was planning to raise between €2.5 billion and €3.5 billion.

Fitch may well decide to cut the credit opinions on euro-zone countries under review by one or two notches by the end of the month, the agency’s director of sovereign international and public finance, Ed Parker said, according to a report by Reuters.

He added that the member states whose ratings are currently under review are Spain, Italy, Belgium, Ireland, Slovenia or Cyprus.

Air Products to Divest Homecare Business

Air Products & Chemicals Inc., the industrial gas maker agreed to sell its homecare business in continental Europe to Germany-based Linde AG for €590 million, or $751 million.

The deal covers the sale of Air Products'' patient-based oxygen-therapy, sleep-therapy and infusion-therapy services in Belgium, Germany, France, Portugal and Spain.

Gainers & Losers

Banco Bilbao Vizcaya Argentaria S.A. rose 1.9% to €6.18 after the Spanish banking group estimated potential goodwill adjustment of €1 billion for its U.S. operations and said it would be included in the 2011 results.

Continental AG soared 3.4% to €55.73 after the auto component-maker plans to invest over €150 million in India over the next two years to strengthen its operations in the country and make an entry into the radial tires segment, a Press Trust of India report said.

Deutsche Telekom AG climbed 1.8% to €8.96 after the integrated telecommunications provider plans to raise money to keep its U.S. wireless unit competitive following AT&T''s failure to acquire the unit, the Financial times reported.

Koninklijke Philips Electronics N.V. slumped 4.4% to €14.95 after the Dutch consumer electronics company said group sales for the fourth quarter are expected to show only mid single-digit comparable growth from last year, amid continued weakness in Europe.

Porsche Automobil Holding SE advanced 3.4% to €42.60 after the holding company estimates the new model of its flagship 911 sportscar to boost sales in 2012.

The company also reported worldwide sales in 2011 increased 22% to 118,867 vehicles compared with sales of 97,273 vehicles in the prior year.

Siemens AG fell 1.3% to €74.80 after the German industrial conglomerate is likely to miss its full-year earnings targets as the fragility of the global economy chokes investment by its customers, the Wall Street Journal reported on Tuesday, citing financial chief Joe Kaeser.

Software AG plummeted 21% to €23.99 after the German business infrastructure software developer estimated sharp declines in fourth quarter profit and revenues, citing weak sales in the U.S.

Total revenues for the quarter would be around €290 million to €295 million versus €326.7 million in the prior year and profit after tax of about €45 million to €50 million, a decline of 23% to 30% from €64.7 million in 2011.

TomTom NV surged 5.2% to €3.09 after the manufacturer of portable navigation devices signed a strategic deal with Samsung whereby TomTom maps and location content will power the Wave3 smartphone. TomTom will provide information to support daily location needs of Wave3 users, from navigation to search and find.

UniCredit SpA traded 17 cents higher to €2.45 ahead of the company rights offering at €1.943 a share and stock was halted several times on Monday in Milan trading. The offering on the first day attracted weak interest from investors as the company plans to raise at least €7 billion.