Greece Faces More Cuts; ABB, Heineken, Munich Re in Focus

Arthi Gupta
13 Mar, 2012
New York City

European indexes gained after German sentiment improved in March. Euro area finance ministers approved a second bailout package for Greece but Greece may need additional spending cuts. BMW forecasted new highs in sales volume and pre-tax earnings for 2012.

[R]2:00 PM Frankfurt – European indexes gained after German sentiment improved in March. Euro area finance ministers approved a second bailout package for Greece but Greece may need additional spending cuts. BMW forecasted new highs in sales volume and pre-tax earnings for 2012.[/R]

European indexes edged higher after German confidence improved.

Euro-zone finance ministers approved a second bailout package for Greece in a meeting in Brussels yesterday. The country had completed a debt swap deal with its private creditors last week, a prerequisite for receiving the next tranche of aid worth €130 billion from the troika.

However, Greece awaits the decision of the International Monetary Fund before it gets the first instalment of the second bailout package.

European Financial Stability Facility Chief Executive Klaus Regling said that the EFSF will give around €100 billion to Greece over the next three years starting with payments of €5.9 billion in March, €3.3 billion in April, and €5.3 billion in May.

Separately, the euro area finance ministers urged Spain to take deeper fiscal cuts to bring the deficit below 3% of GDP by 2013.

In Paris trading, the CAC-40 Index rose 35.61 or 1% to 3,525.38 and in Frankfurt the DAX Index edged higher 64.34 or 0.9% to 6,965.76.

Italy’s 10-year yields rose six basis points to 4.90% and Spanish yields climbed two basis points to 5.07%.

Greece may have to cut its government spending as much as 5.5% of GDP in 2013 and 2014 according to the latest report released by the European Commission report released today. The additional cuts are needed to meet the deficit target set by the international lenders.

The government revenues are lagging the earlier projections set by the government and additional cuts are needed to meet deficit targets and improve government finances.

French Inflation Up

French consumer prices rose 0.4% from a month ago in February compared to the 0.4% drop in January, the statistics office Insee showed.

Annual inflation remained steady at 2.3% in February.

German Sentiment Improves

Germany''s economic sentiment rose 16.9 points to a level of 22.3 in March, the highest level since June 2010, the Centre for European Economic Research (ZEW) said today.

Gainers & Losers

ABB Ltd. rose 1.4% to Sfr18.89 after the power and automation technology group won orders worth about $100 million from Rio Tinto for 17 distribution substations to support increased production at iron ore mines in Western Australia.

BMW AG fell 0.8% to €70.50 after the automobile manufacturer is targeting new highs in sales volume and pre-tax earnings for 2012.

Heineken N.V. climbed 1% to €41.64 after the Dutch brewer successfully priced €1.35 billion of bonds in a two-part offering and said the proceeds of the offerings will be used for general corporate purposes.

Munich Re Group AG soared 2.9% to €111.85 after the reinsurance company reported fourth quarter profit rose 34.3% to €627 million from €467 million the prior year. Quarterly gross premiums written, on an IFRS basis, improved 8.1% to €12.41 billion from €11.48 billion in the comparable period.

For the year 2012, the company aims to achieve a consolidated profit of nearly €2.5 billion.

Telefonaktiebolaget LM Ericsson gained 1.2% to SEK 67.70 after the Sweden-based communications technology company submitted a binding offer to acquire the Broadcast Services Division of Technicolor.

The purchase price is €19 million and a potential earn-out based on 2015 revenues of the Broadcast Services activity of up to €9 million.

VimpelCom Ltd. dipped 0.2% to $11.82 after the provider of telecommunications services reported fourth quarter 2011 operating revenues surged 109% to $5.88 billion compared with $2.81 billion in the prior-year period.

Net loss in the quarter was $386.12 million or 23 cents a diluted share compared to a profit of $461.22 million or 34 cents per share last year, impacted by non-cash items related to acquisitions and impairments of $437 million.

During the quarter, the company''s total mobile subscriber base increased 13% annually to 205 million.

Volkswagen AG dropped 0.5% to €139.15 after the German automaker''s luxury auto division Audi AG is in talks to buy Italian luxury motorbike maker Ducati Motor Holding SpA, according to media reports on Monday.