EU Adopts Fiscal Compact; ThyssenKrupp, Outokumpu in

Arthi Gupta
31 Jan, 2012
New York City

European leaders agreed on the fiscal compact that will pave the way for the European Central Bank involvement. Czech Republic and UK dissented. ThyssenKrupp agreed to sell its Finnish unit for

[R]1:30 PM Frankfurt – European leaders agreed on the fiscal compact that will pave the way for the European Central Bank involvement. Czech Republic and UK dissented. ThyssenKrupp agreed to sell its Finnish unit for €2.7 billion.[/R]

European markets traded higher after leaders in the region agreed to a new fiscal compact and accelerated the set up of the rescue funds.

The new fiscal compact calls for a higher monitoring from the central bank and a tighter budgetary control to meet lower debt guidelines. The compact will become effective across the euro zone as soon as 12 nations ratified it and avoid additional delays if some nations hold up the treaty in referendums.

Czech Republic joined the UK in dissenting from accepting the new fiscal compact that was approved by the rest of 25 nations in the European Union.

The leaders also finalized the setting up of the bailout fund but did not agree on its size and how it will be financed.

Yesterday, traders were jittery after Portuguese bond yields soared on worries that the country may require a second bailout to avoid a bankruptcy.

The yield on 10-year Portuguese bonds over German Bunds exceeded 15% for the first time in the euro era.

However, Prime Minister Pedro Passos Coelho said at the European Union summit in Brussels that the government is planning a second wave of asset sales.

The government is looking to sell up to a 40% stake of the national power grid and gas pipeline operator Redes Energéticas Nacionais, as well as a 7% stake in the oil company Galp Energia SGPS SA early this year.

In Paris trading, the CAC-40 Index gained 38.74 or 1.2% to 3,304.38 and in Frankfurt the DAX Index edged higher 57.01 or 0.9% to 6,501.32.

The Italian 10-year yield fell 10 basis points to 5.99%.

French Growth Outlook Cut

The French economy is set to grow 0.5% this year, instead of 1%, Prime Minister Francois Fillon told reporters on Monday. The revision would cost the government around €5 billion.

Fillon noted that introduction of 0.1% of financial transaction tax would generate €500 million in 2012, and measures to counter tax evasion will create another €300 million.

Euro-zone Jobless Rate Stable

The seasonally adjusted jobless rate in the euro area remained unchanged at 10.4% in December, the same as in November, data released by Eurostat showed.

Gainers & Losers

Banco Santander SA rose 1.2% to €6.06 after the Spanish lender reported fiscal year 2011 revenue grew 5% to €44.3 billion in 2011. Net profit for the year fell 35% to €5.35 billion compared with €8.18 billion a year earlier.

EADS NV, the company specializing in the aerospace, defense and related services climbed 1.5% to €25.75 after a broker upgrade.

Siemens AG gained 0.7% to €72.74 after the engineering company offered C$382 million or $380 million to buy Canadian network company Ruggedcom Inc.

ThyssenKrupp AG soared 2.5% to €21.64 after the German steelmaker confirmed that an agreement in principle has been reached to sell its stainless steel unit Inoxum to Finland''s Outokumpu Oyj in a €2.7 billion or $3.56 billion deal.