European Indexes Lower; France Telecom Net Drops 20%

Arthi Gupta
22 Feb, 2012
New York City

European markets edged lower after private sector contracted unexpectedly in February. Shell offered to acquire Cove Energy for $1.6 billion. Wells Fargo agreed to buy energy lending business of BNP Paribas.

[R]1:00 PM Frankfurt – European markets edged lower after private sector contracted unexpectedly in February. Shell offered to acquire Cove Energy for $1.6 billion. Wells Fargo agreed to buy energy lending business of BNP Paribas.[/R]

European markets edged lower after private sector contracted in February. Traders were cautious in early trading after the euphoria of the Greece bailout waned.

Investors also took the note of the fine print in the Greek agreement that set terms of future bonds offerings are governed by British law and contested in Luxembourg courts. In addition, in the event of default, Greek lenders will have the right to seize the gold reserves held by the central bank of Greece.

Greek agreement appears to be designed to save banks and international lenders, as has been the case with the emergency lending in Asian crisis and in Mexico’s debt crisis in the late nineties.

China's manufacturing activity improved in February. The HSBC flash manufacturing purchasing managers' index rose to a four-month high of 49.7 in February from 48.8 in January.

In Paris trading, the CAC-40 Index declined 20.11 or 0.6% to 3,445.13 and in Frankfurt the DAX Index edged lower 75.36 or 1.1% to 6,833.15.

The Italian 10-year yield increased six basis points to 5.5% and Spanish 10-year bond yields rose two basis points to 5.13%.

Euro-zone Private Sector Contracts

Euro-zone private sector contracted in February, a survey by Markit Economics showed today. The composite output index fell to 49.7 in February from 50.4 in January.

The manufacturing purchasing managers' index rose to 49 in February from 48.8 in January. The services activity index declined to 49.4 in February from 50.4 in January.

Shell Offers to Acquire Cove Energy

Royal Dutch Shell Plc announced an offer to acquire Cove Energy plc for 195 pence a share in cash or a total value of approximately £992.4 million or $1.56 billion.

Wells Fargo to Buy Energy Lending Unit of BNP Paribas

Wells Fargo Bank, part of Wells Fargo & Company agreed to acquire the North American reserve- based and related diversified energy lending business of BNP Paribas. Terms of the all cash transaction were not disclosed.

Gainers & Losers

Accor SA soared 4.7% to €27.43 after the French hotel group said fiscal 2011 revenues grew 2.5% to €6.1 billion from €5.95 billion a year ago. For the full year, the company's net attributable profit plunged to €27 million from €3.6 billion reported last year.

Earnings before interest and taxes increased 18.8% to €530 million.

France Telecom SA rose 1.8% to €11.65 after the telecommunications company said full-year 2011 revenues declined 1.6% to €45.28 billion from €46.02 billion in the preceding year. For the full year, net income fell 20% to €3.89 billion or €1.46 per share from €4.88 billion or €1.82 per share last year.

Rheinmetall AG climbed 1.3% to €44.58 after the automotive components and defense equipment maker reported fiscal 2011 consolidated sales rose 12% to €4.45 billion. Pre-tax earnings for the year climbed 29% to €295 million.

Rosenbauer International AG fell 1.5% to €38.37 after the manufacturer of fire fighting vehicles said full year 2011 revenues fell 9% to €541 million from €595.7 million last year.

Schneider Electric S.A. surged 6% to €50.73 after the electrical engineering and power-management company reported full-year 2011 sales grew 14% to €22.39 billion from €19.58 billion in the previous year.

Net income group rose 6% to €1.82 billion from €1.72 billion last year. Earnings per share were €3.39 compared to €3.30 a year earlier.

UBS AG declined 1.6% to Sfr12.98 after the financial services company said it is issuing $2 billion of subordinated loss-absorbing non-dilutive notes which would qualify as tier 2 capital under Basel III standards.

Volvo AB dropped 2.4% to SEK 96.85 after the Swedish automaker reported a 2% increase in its January 2012 total deliveries from its truck operations to 15,647 vehicles from 15,277 vehicles in the prior-year period.