Greek Political Deadlock Continues, ArcelorMittal Net Plunges

Arthi Gupta
10 May, 2012
New York City

The European indexes edged lower after the Greek political turmoil intensified and the nation is heading for another snap election in less than two months. The European Financial Stability Facility confirmed the release of

[R]1:00 PM Frankfurt – The European indexes edged lower after the Greek political turmoil intensified and the nation is heading for another snap election in less than two months. The European Financial Stability Facility confirmed the release of €5.2 billion to Greece.[/R]

The European indexes edged lower after the Greek political turmoil intensified and the prospect of another election are increasingly likely in the next six weeks. Alexis Tsipras failed in his bid to form a coalition government as expected.

Weak quarterly earnings from ArcelorMittal, Deutsche Telekom, and RWE also contributed to the weak market sentiment.

Alexis Tsipras, the Greek leader of the leftist Syriza bloc failed to form a coalition government and socialist Pasok leader and former finance minister Evangelos Venizelos is expected to attempt to form a new government.

However, the European Financial Stability Facility board confirmed the release of the outstanding amount of €5.2 billion to Greece from the first instalment of €39.4 billion by the end of June.

The EFSF will disburse €4.2 billion on May 10 and the remaining funds of €1 billion will be disbursed depending on the financing needs of Greece.

The immediate task of a new government will be to cut spending by €11.5 billion to deal with budget gaps in 2013 and 2014, as part of the €130 billion bailout package. However, the communist party and the left coalition party oppose bail out terms and do not want to cut any more government spending.

Euro-zone''s economic outlook continues to be subject to downside risks, the European Central Bank said in its monthly bulletin today. The central bank expects economic activity to recover gradually over the course of the year.

The ECB said downside risks relate in particular to an intensification of tensions in euro area debt markets and their potential spillover to the euro area real economy, as well as to further increases in commodity prices.

The ECB said inflation rates are likely to stay above 2% this year.

In Paris trading, the CAC-40 Index declined 38.56 or 1.2% to 3,080.17 and in Frankfurt the DAX Index edged lower 23.48 or 0.4% to 6,452.66.

The yield on Spain’s benchmark 10-year bonds fell four basis points to 6.02%, and the Italian bond yields fell two basis points at 5.76%.

French Output Rises, Sentiment Flat

France''s manufacturing output increased a seasonally and working-day adjusted 1.4% from a month ago in March, following a revised 0.9% drop in February, data released by the statistics office INSEE showed today. The latest gain is the biggest since July last year, when output rose 1.7%.

Separately, French business confidence remained unchanged at 95 in April; survey results from the Bank of France showed. Likewise, confidence in the service sector held steady at 93 in April.

Greek Unemployment Rate Up

Greece''s seasonally adjusted unemployment rate rose to 21.7% in February from 21.3% in January, data published by the Hellenic Statistics Authority showed. The jobless rate rose to its highest level on record in February.

Gainers & Losers

Aegon NV soared 5.5% to €3.49 after the Dutch insurer reported first quarter sales advanced 25% to €1.76 billion from €1.41 billion in the prior-year quarter. Net income in the quarter climbed 59.3% to €521 million compared with €327 million last year.

ArcelorMittal SA climbed 2.5% to €12.71 after the steel company reported first quarter sales grew 2.3% to $22.70 billion on an annual basis. Net income in the quarter plunged to $11 million or 1 cent per from $1.07 billion or 69 cents per share last year. The latest quarter results were hurt by impairment charges of $69 million and restructuring charges of $107 million.

Coca-Cola Hellenic Bottling Company S.A. rose 0.4% to $18.26 after the bottler stated first quarter net sales revenue grew 1% to €1.44 billion from €1.42 billion in the prior-year quarter. Net loss in the quarter widened 219% to €28.4 million or 8 cents per share compared to a loss of €8.9 million or 2 cents per share last year.

Deutsche Telekom AG gained 2.5% to €8.76 after the integrated telecommunications provider reported first quarter net revenue declined 1.1% to €14.43 billion from €14.6 billion in the comparable period a year ago. Net profit in the quarter fell 50.4% to €238 million from €480 million last year.

RWE AG advanced 1% to €32.45 after the German utility said first quarter external revenue dropped 1% to €15.59 billion, from €15.75 billion last year. Net income in the quarter declined 28% to €1.31 billion from €1.82 billion. Earnings per share dropped to €2.13 from €3.41 a year ago quarter.