European Markets Rise Despite Greek Economic Collapse

Arthi Gupta
08 Feb, 2012
New York City

European markets gained as Greek economy deteriorates and Germany sold

[R]2:00 PM Frankfurt – European markets gained as Greek economy deteriorates and Germany sold €3.293 billion of 5-year notes at 0.91% yield. Nokia plans to cut 4,000 manufacturing jobs in Europe and Mexico. BMW vehicle sales rose 6.6% in January.[/R]

The European financial markets and the euro edged higher in a cautious trading on the hopes a resolution to the Greek debt restructuring talks. However, Greece may need larger than the €130 billion in bailout.

The difficult discussions are fraught with disagreements in how to reform labor markets and how much debt to be trimmed from the total. The European Central Bank is adamantly opposed to the pressures from the International Monetary Fund and Greece to participate in debt swap.

The ECB holds €55 billion of Greek bonds and in addition holds €100 billion of bonds from Portugal, Spain and Italy.

However, the situation of Greece is deteriorating and the value added tax revenues in January declined 18% and the privatization revenue is expected to be half of the estimated €9.3 billion.

Greek Prime Minister Lucas Papademos is expected to meet leaders of three parties that are supporting his interim government to finalize a draft agreement agreed with the international lenders.

Germany auctioned €3.293 billion of 5-year bonds at lower borrowing costs but fell short of €4 billion target.

In Paris trading, the CAC-40 Index gained 17.45 or 0.5% to 3,428.99 and in Frankfurt the DAX Index edged higher 49.83 or 0.7% to 6,804.03.

The Spanish 10-year government bond yields rose five basis points to 5.20%.

German Bond Auction

Germany sold €3.293 billion of five-year notes, known as Bobls, due to mature on Feb 24, 2017 at an average yield of 0.91% compared with 0.9% in the last auction on January 11. The bid-to-cover ratio was 1.8 compared with 2.8 at a similar sale in January.

The German 10-year yield rose one basis point to 1.97%.

German Exports Slump

German exports, on a calendar and seasonally adjusted basis, slumped 4.3% from a month ago in December, following a 2.6% growth in November, according to the latest data from the Federal Statistics Office released today. The decline was the steepest since January 2009.

Nokia Plans Organizational Changes

Nokia announced planned changes at its factories in Komarom, Hungary, Reynosa, Mexico and Salo, Finland aimed to focus on smartphone product customization that will lead to 4,000 jobs cut.

Nokia also intends to shift device assembly operations in Nokia factories in Asia.

Gainers & Losers

Bayerische Motoren Werke AG gained 0.2% to €69.48 after the German carmaker reported sales of BMW, MINI and Rolls-Royce brand vehicles rose 6.6% to 112,163 in January from 105,193 vehicles a year-ago.

Douglas Holding AG rose 0.9% to €33.76 after the German retailer reported first quarter sales increased 1.3% to €1.19 billion from €1.18 billion reported last year. Net income in the quarter declined 2.3% to €91.7 million or €2.32 a share from €93.9 million or €2.38 per share in the previous year.

Sanofi SA fell 1.8% to €55.53 after the diversified healthcare company said fourth quarter net sales increased 8.8% to €8.51 billion from €7.82 billion in the year-ago period. Net income in the quarter surged 230% to €1.44 billion or €1.08 per share from €437 million or 33 cents per share last year.

For the year 2011, net sales advanced 3.2% to €33.39 billion from €32.37 billion. Annual net income grew 4% to €5.69 billion or €4.31 per share from €5.47 billion or €4.19 per share in the previous year.

Syngenta AG dropped 1.6% to Sfr289.30 after the Swiss agribusiness reported full year 2011 sales grew 14% to $13.27 billion from $11.64 billion a year ago. Net income for the year climbed 14.3% to $1.6 billion or $17.31 per share from $1.4 billion or $14.99 a share last year.

Telenor ASA rose 2.8% to 96.45 kroner after the Norway-based telecommunication company reported fourth quarter revenues grew 2.3% to 25.43 billion kroner from 24.86 billion kroner in the prior-year quarter. Loss in the quarter was 1.94 billion kroner or 1.19 kroner per share compared to a profit of 2.1 billion kroner or 1.28 kroner per share a year ago.

For the full year, revenues climbed 4% to 98.52 billion kroner from 94.84 billion kroner. Annual net income plunged 45% to 7.94 billion kroner or 4.88 kroner per share from 14.33 billion kroner or 8.67 kroner per share in the previous year.

Vestas Wind Systems A/S plunged 14.6% to DKK 57 after the Danish manufacturer of wind turbines reported fourth quarter revenues plunged 35% to €2.04 billion from €3.12 billion last year.

In the quarter, the company produced and shipped 721 wind turbines with an aggregate capacity of 1,478 megawatts compared to 845 wind turbines and 1,626 megawatts in 2010.