Spanish, Italian and Dutch Yields Rise, Shell Lifted Cove Offer

Arthi Gupta
24 Apr, 2012
New York City

The European indexes rebounded after debt auctions by Spain, Italy and the Netherlands. French sentiment improved in April. The UK public sector net borrowing rose in March. Shell agreed to buy Cove for

[R]1:00 PM Frankfurt – The European indexes rebounded after debt auctions by Spain, Italy and the Netherlands. French sentiment improved in April. The UK public sector net borrowing rose in March. Shell agreed to buy Cove for £1.12 billion.[/R]

Market indexes across Europe advanced in the early morning after Spain, Italy and The Netherlands completed debt offerings but yields rose sharply from the previous auctions. Indexes fell more than 2% yesterday after Dutch government failed to agree on a budget and President Sarkozy in France trailed in the Presidential election primary.

The Netherlands Prime Minister Mark Rutte resigned yesterday after failing to reach an agreement on budget cuts with his coalition partner, the Freedom Party led by Geert Wilders. Rutte is scheduled to address the parliament in the afternoon.

In Paris trading, the CAC-40 Index gained 32.61 or 1.0% to 3,130.98 and in Frankfurt the DAX Index edged higher 58.00 or 0.9% to 6,580.92.

Spanish, Italian, Dutch Bond Auctions

The Spanish Treasury placed €1.9 billion of treasury bills against the target of €1 billion to €2 billion.

The agency sold €725 million of the 3-month bills at an average yield of 0.634%, up from 0.381% in an auction on March 27. The bid-to-cover ratio rose to 7.6 from 3.5.

The country also placed €1.2 billion 6-month bills at an average yield of 1.580%, up from 0.836% in March. Demand was 3.25 times the offer, down from 5.6 in the previous sale.

In another report, Italy sold €3.44 billion of zero-coupon bonds at an auction today

Italy sold €2.5 billion of the January 2014 CTZ zero-coupon bond at an average yield of 3.36% compared to an average yield of 2.35% a month ago. The bid-to-cover ratio fell to 1.796 from 1.86 at the end of March.

The Treasury also raised €943 million from the sale of inflation linked BTPei bonds maturing in 2017 and 2019.

The inflation linked BTPei bonds maturing in 2019 had an average yield of 4.32%, up from 3.06% at the previous auction a month ago. The average yield on the September 2017 BTPei was 3.88%.

Separately, the Netherlands raised €2 billion from the sale of it 2- and 25-year bonds.

The Dutch State Treasury Agency raised €1.995 billion from the sale of its 3.75 percent July 2014 bond at an average yield of 0.523% and the 4 percent January 2037 bond at an average yield of 2.782%.

French Sentiment Improves

French consumer confidence improved in April, data released by INSEE showed today.

The seasonally adjusted consumer confidence indicator rose to 88 in April from 87 in March. The latest reading is the highest since November 2010, when it was 91.

Spanish Home Mortgages Fall

The number of housing mortgages in Spain fell 47.1% annually in February compared to the 41.3% drop in January, data released by the statistics office INE showed.

UK Public Sector Borrowing Rises

The UK''s public sector net borrowing rose from a year-ago level in March, data from the Office for National Statistics showed today.

Public sector net borrowing excluding temporary effects of financial interventions rose to £18.2 billion in March from £17.95 billion last year. This was also higher than £12.2 billion in borrowing in February.

Shell to Buy Cove Energy for $1.8 Billion

Royal Dutch Shell Plc, the oil company agreed to buy Cove Energy, operating in East Africa, in a sweetened cash deal of £1.12 billion or $1.8 billion.

Shell Exploration made an offer of 195 pence per share in cash on February 22, valuing Cove at about £992.4 million. However, Shell raised its offer for Cove to 220 pence a share and the revised per-share price represents a premium of 42.4% to Cove''s Friday''s closing price of 154.5 pence per share.

Gainers & Losers

ARM Holdings plc slumped 3.8% to 545 pence after the designer of chips reported first quarter total revenues climbed 14% to £132.5 million from £116 million a year earlier. Profit before tax for the quarter soared 69% to £51.3 million from £30.4 million in the previous year.

Koninklijke KPN NV soared 4.1% to €6.93 after the Dutch telecommunication firm said first quarter profit revenues fell 1.2% to €3.16 billion from €3.20 billion a year earlier. Net profit in the quarter slumped 51% to €288 million or 20 cents per share compared to €591 million or 39 cents per share in the prior year.

Nordea Bank AB surged 3.6% to SEK 56.50 after the Swedish financial services group said first quarter profit rose 4.5% to €773 million compared with €740 million a year earlier. Net interest income for the period climbed 7% to €1.42 billion from €1.32 billion n the earlier year quarter.

Novartis AG fell 1.4% to $55.62 after the Swiss drug maker reported first quarter net sales slid 2% to $13.74 billion from $14.03 billion in the prior year. Net income in the quarter declined 18% to $2.33 billion from $2.82 billion in the same period last year.

Sales of Diovan fell 15% to $1.19 billion.

Scania AB increased 5.8% to SEK 134.60 after the manufacturer of heavy trucks, buses, and diesel engines said first quarter net sales fell 3% to SEK 20.13 billion from SEK 20.69 billion in the prior-year quarter. Net profit in the quarter dropped 29% to SEK 1.79 billion or SEK 2.24 per share from last year''s SEK 2.51 billion or SEK 3.14 per share.