European Indexes Up; NYSE, Deutsche Boerse Merger Terminated

Arthi Gupta
01 Feb, 2012
New York City

European markets rose after Germany and Portugal completed bond auctions at lower yields. The European Commission blocked the proposed merger of NYSE Euronext with Deutsche Boerse. Dassault Aviation was named as a preferred bidder for fighter jets by India.

[R]1:30 PM Frankfurt – European markets rose after Germany and Portugal completed bond auctions at lower yields. The European Commission blocked the proposed merger of NYSE Euronext with Deutsche Boerse. Dassault Aviation was named as a preferred bidder for fighter jets by India.[/R]

European markets traded higher after investors shifted their attention to the Greek negotiations and better than expected manufacturing data from China. Hopes ran high that the European Central Bank will agree to the Greek bond restructuring and accept the 50% loss in the bond prices from its face value.

China''s official Purchasing Managers Index unexpectedly rose to 50.5 in January from 50.3 in December, according to data released by the China Federation of Logistics and Purchasing.

The January 2012 bank lending survey from the European Central Bank showed the net tightening of credit standards by euro area banks surged in the fourth quarter of 2011 for loans to non-financial corporations and to households for house purchase.

Looking ahead, euro area banks expect a further net tightening of credit standards, albeit at a slower pace than in the fourth quarter of 2011.

For the first quarter of 2012 banks expect a sizeable drop in the net demand for housing loans, while the decline in net demand for consumer credit is expected to remain in the same range.

In Paris trading, the CAC-40 Index gained 53.29 or 1.6% to 3,351.84 and in Frankfurt the DAX Index edged higher 131.33 or 2% to 6,590.10.

The Italian 10-year yield fell 21 basis points to 5.75% and Spain’s 10-year yields declined 14 basis points to 4.84%.

German Bond Auction

Germany sold €4.093 billion 2 percent January 2022 bonds in an auction today, the Bundesbank said. The auction drew bids totaling €5.683 billion against a target of €5 billion.

The average yield dropped to 1.82%, from 1.93% in the previous auction on January 4. Demand was 1.4 times the offer compared to 1.3 in the previous sale.

Portuguese Debt Auction

The Portuguese debt agency sold €1.5 billion of its short-term debt today as borrowing costs fell on both maturities.

The average yield on 3-month bills declined to 4.068% from 4.346% in the last auction on January 18 and the bid-to-cover ratio was 2.8.

The agency also sold 6-month bills at an average yield of 4.463%, down from 4.740% two weeks ago at a bid-to-ratio of 2.6.

Euro-zone Inflation Stable

Euro-zone annual inflation remained unchanged at 2.7% in January, flash estimates from Eurostat showed today.

German Inflation Dips

Germany''s flash consumer price inflation rate fell to 2% in January, from 2.1% in December, flash estimates from the Federal Statistics Office showed.

EC Blocks NYSE Euronext, Deutsche Boerse Merger

The European Commission blocked the proposed merger of NYSE Euronext with Deutsche Boerse on the contention that the merger would create “almost a monopoly” in the trading of derivatives. Both companies said they plan to drop the merger plan.

""NYSE Euronext announced its intent to resume a $550 million share repurchase program following the termination of the merger agreement and after the release of its fourth quarter and 2011 year-end results on February 10, 2012,"" the exchange operator said in a statement.

Gainers & Losers

ACE Ltd. rose 0.9% to $69.60 after the Swiss insurer reported fourth quarter net declined 25% to $750 million or $2.20 per share compared to $1.0 billion or $2.92 per share last year. Net premiums written grew 6% to $3.63 billion from $3.42 billion last year.

Dassault Aviation SA plunged 4.6% to €692.01 and the French defense supplier was named as the preferred bidder to supply the Indian Air Force with 126 of its fighter jets with a condition to transfer certain technologies.

Enel SpA climbed 0.8% to €3.15 after the Italian utility said fiscal year 2011 consolidated revenue climbed 8.3% to €79.54 billion, from €73.4 billion in 2010.

Hannover Re dipped 0.8% to €40.37 after the German reinsurer said it anticipates a good financial year in non-life reinsurance, also expecting further rate increases in the treaty renewals during 2012.

Intesa Sanpaolo S.p.A. soared 4.6% to €1.53 after the Italian lender launched a €1.5 billion bond issue through its subsidiary Intesa Sanpaolo Bank Ireland Plc.

Norsk Hydro ASA climbed 1.1% to NOK 31.35 after the aluminum maker said that it will write down the value of certain fixed assets by approximately NOK 1.3 billion, affecting its fourth-quarter 2011 results.

Roche Holding AG fell 1.2% to Sfr153.90 after the pharmaceuticals and diagnostics kits maker reported fiscal year 2011 total sales fell 10% to Sfr 42.53 billion from Sfr 47.47 billion in the year earlier period. Net income for the year increased 7.3% to Sfr 9.54 billion from Sfr 8.89 billion last year.

Tognum AG 0.04% to €26.03 after the German engine maker stated fiscal year revenues rose 16% to €2.97 billion, from €2.56 billion a year ago.