French, Spanish Bond Auctions Diverge, BMW Net Up 18%

Arthi Gupta
03 May, 2012
New York City

The European indexes gained and Spain completed bond auction at a higher borrowing cost and on strong earnings reports. Novartis agreed to acquire U.S.-based Fougera Pharmaceuticals for $1.525 billion. BMW quarterly net rose 18% on strong Asia sales.

[R]1:00 PM Frankfurt – The European indexes gained and Spain completed bond auction at a higher borrowing cost and on strong earnings reports. Novartis agreed to acquire U.S.-based Fougera Pharmaceuticals for $1.525 billion. BMW quarterly net rose 18% on strong Asia sales.[/R]

The European indexes climbed after France and Spain successfully completed the bond offerings and BMW, Hermes, HeidelbergCement, Hannover Re and Societe Generale reported better than expected net incomes.

The European Central Bank policymakers in a meeting in Barcelona, Spain decided to leave its key interest rate unchanged at a record low 1% for the fifth consecutive month in May.

The rate on the marginal lending facility was at 1.75%, while the deposit facility rate was held at 0.25%.

France raised €7.43 billion at lower borrowing costs and Spain sold €2.52 billion of debt at higher borrowing costs today.

Novartis agreed to acquire U.S.-based Fougera Pharmaceuticals and DSM agreed to acquire Kensey Nash to strengthen its biomedical business.

On the earnings front, French lender Societe Generale net fell 20% and Metro loss widened in the first quarter.

BMW profit rose 18% in the first quarter driven by a 31.9% sales growth in Asia with China recording sales growth of 36.6% and Japan 44.4%.

In Paris trading, the CAC-40 Index gained 36.43 or 1.1% to 3,263.24 and in Frankfurt the DAX Index edged higher 69.19 or 1.0% to 6,780.16.

The yield on Spain’s benchmark 10 year bonds was at 5.84%, and the Italian bond yields were at 5.53%.

French, Spanish Bond Auctions

The French government raised €7.43 billion through a debt sale today as borrowing costs fell.

France sold €3.32 billion of benchmark 10-year bonds at an average yield of 2.96% compared with 2.98% in the last auction on April 5.

Spain sold €2.52 billion of 3- and 5-year bonds at higher borrowing costs at an auction today, the Bank of Spain said.

The Treasury sold €979 million of a bond maturing July 30, 2015 at an average yield of 4.037%. The bid-to-cover ratio rose to 2.9 from 2.4 at the last auction in March.

Spain also sold €764 million of a bond maturing January 31, 2017 at an average yield of 4.752% compared to an average yield of 3.565% at the last auction in February. The bid-to-cover ratio was 3.7 compared to 2.7 at the previous auction in February.

The country also sold €773 million of a bond maturing July 30, 2017, at a yield of 4.960% for a bid-to-cover ratio of 3.1.

Euro-zone PPI Rises

Euro-zone's producer price index rose 0.5% on a monthly basis in March compared to the 0.6% gain in February, data from Eurostat showed today.

In EU27, the PPI rose 0.6% on a monthly basis and climbed 3.8% annually in March.

Novartis to Acquire Fougera

Novartis agreed to acquire U.S.-based specialty dermatology generics company Fougera Pharmaceuticals for $1.525 billion in an all-cash transaction.

The acquired company will be merged with Sandoz, the generic pharmaceuticals division of Novartis.

DSM to Buy Kensey Nash

Royal DSM, the global life sciences and materials sciences company entered into an agreement to acquire Kensey Nash through a cash tender offer, followed by a merger with a subsidiary of DSM, for $38.50 in cash per share for total enterprise value of approximately $360 million.

The agreed price represents a premium of 33% to Kensey Nash’s closing share price of $29.01 on May 2.

Gainers & Losers

adidas AG rose 1.3% to €63.99 after the German sports goods maker reported first quarter net sales climbed 16.8% to €3.82 billion from €3.27 billion in the prior year. Net income attributable to shareholders increased 38.2% to €289 million from €209 million. Earnings per share climbed to €1.38 from €1.00.

BMW AG climbed 1.9% to €72.44 after the German automobile, motorcycle and engine manufacturing company reported first quarter group revenues advanced 14.1% to €18.29 billion from €16.04 billion in the comparable period in 2011. Net profit in the quarter rose 18.1% to €1.35 billion or €2.05 per share compared with €1.14 billion or €1.73 per share last year.

Hannover Rueckversicherung AG soared 3.2% to €46.69 after the reinsurance group reported first quarter net income surged to €261.3 million from €52.3 million last year. Earnings per share grew to €2.17 from 43 cents in the prior year.

Investment income for the quarter rose 12.4% to €440.6 million from €392 million in the previous year.

HeidelbergCement AG slumped 4% to €40.87 after the building materials company said first quarter revenue climbed 7.7% to €2.8 billion from €2.6 billion in the comparable period a year ago. Group share of loss widened 26.8% to €203.8 million from €160.7 million in the prior-year quarter.

Ipsen SA dipped 0.4% to €20.40 after the pharmaceutical company said first quarter sales rose 2.4% to €292.8 million from €285.8 million a year ago.

Metro AG fell 1% to €23.83 after the German retailer reported first quarter sales grew 2% to €15.6 billion from €15.3 billion in the previous year. Loss attributable to shareholders widened to €82 million or 25 cents per share from €3 million or 1 cent per share a year ago.

Societe Generale SA climbed 1.8% to €18.36 after the French lender said first quarter group net income fell 20.1% to €732 million from €916 million reported a year ago. Earnings per share for the first quarter were 88 cents.

Net banking income for the quarter declined 4.7% to €6.31 billion compared to €6.62 billion last year.