European Commission Forecasts Mild Recession; Allianz Net Slumps

Arthi Gupta
23 Feb, 2012
New York City

The European Commission said the euro area is likely to see a mild recession. German business sentiment improved more than estimated in February. Allianz, Cr

[R]1:30 PM Frankfurt – The European Commission said the euro area is likely to see a mild recession. German business sentiment improved more than estimated in February. Allianz, Crédit Agricole, and Dexia reported disappointing earnings.[/R]

European markets traded sideways after the European Commission said the euro area is likely to see a mild recession with signs of stabilization this year.

The Commission said the unexpected stalling of the recovery in late 2011 is set to extend into the first two quarters of 2012. However, modest growth is predicted to return in the second half of the year. On an annual basis, real GDP in 2012 is now forecast to remain unchanged in the EU (0.0%) and to contract by 0.3% in the euro area.

Also, the Commission stated the inflation forecast for 2012 has been revised slightly upwards compared with the autumn, due to persistently high energy prices and increases in indirect taxes. It now stands at 2.3% in the EU and 2.1% in the euro area.

Weaker-than-estimated corporate earnings did not boost investor sentiment.

In Paris trading, the CAC-40 Index declined 1.43 or 0.04% to 3,446.12 and in Frankfurt the DAX Index edged lower 28.26 or 0.4% to 6,815.21.

The Italian 10-year yields declined to 5.7%.

German Confidence Improves

German business sentiment improved more than estimated in February, according to a survey from the Munich-based Ifo institute.

The confidence index rose to 109.6 in February from 108.3 in January.

Gainers & Losers

Allianz SE rose 1.1% to €90.76 after the Germany-based financial services provider reported fourth quarter total revenues fell 3.7% to €25 billion from €26 billion in the prior-year quarter. Net income in the quarter slumped 56.7% to €492 million or €1.06 per share versus €1.14 billion or €2.49 per share a year ago.

Commerzbank AG plunged 4.7% to €1.97 after the Germany-based bank reported fourth quarter consolidated profit climbed 23% to €316 million from €257 million the prior year. Net interest income for the period dropped 4% to €1.62 billion compared with €1.68 billion in the earlier year quarter.

Crédit Agricole SA fell 3.7% to €4.82 after the French banking group said fourth quarter revenue fell 4% to €4.7 billion. Net loss group share in the quarter widened to €3.1 billion compared to a loss of €328 million in the last quarter of 2010.

Dexia SA plummeted 4.6% to €0.29 after the Franco-Belgian lender reported full-year 2011 net loss group share of €11.64 billion or €5.97 per share compared to a profit of €723 million or 37 cents per share a year ago.

Koninklijke Wessanen NV slumped 7.6% to €2.71 after the organic food producer stated fourth quarter revenue fell 8.9% to €157.2 million from €172.5 million a year ago. Loss in the quarter widened 294% to €35.1 million or 46 cents per share compared to loss of €8.9 million or 12 cents per share a year ago.

Safran SA declined 2.5% to €24.80 after the France-based high-technology company reported full-year 2011 revenue rose 9.1% to €11.74 billion from €10.760 billion a year ago. Adjusted net income group share climbed 27% to €644 million or €1.59 per share compared to €508 million or €1.27 per share last year.

Telekom Austria AG gained 2.8% to €8.80 after the provider of a range of fixed line, mobile, data, and Internet communications services reported fourth quarter operating revenues fell 4.7% to €1.115 billion compared with €1.17 billion in the previous year. Net loss in the quarter widened 424% to €321.5 million or 72 cents per share compared with a loss of €61.3 million or 14 cents per share a year ago.