Eurobonds Hopes Extend Gains in European Markets

Arthi Gupta
25 May, 2012
New York City

The European indexes extended gains for the second day and the Euro area leading index fell and Spanish producer price inflation eased in April. Delphi offered to acquire the motorized vehicles unit of FCI for

[R]1:00 PM Frankfurt – The European indexes extended gains for the second day and the Euro area leading index fell and Spanish producer price inflation eased in April. Delphi offered to acquire the motorized vehicles unit of FCI for €765 million. Japan Tobacco agreed to buy Gryson for €475 million.[/R]

The European indexes edged higher on the optimism that Germany may be pursued to approve the creation of euro bonds after Italian Prime Minister Mario Monti said in a television interview that many European Union leaders are in favor of the bonds.

He was also optimistic that Germany could be persuaded to agree to approve the bonds. Spain, Italy, Portugal and Greece are likely to need additional bailout funds to sustain the banking system and the European Central Bank is not likely to offer additional liquidity measures.

The euro bonds will offer new capital in the peripheral euro zone nations that will drive growth measures but will also saddle wealthy northern European nations with more debt obligations.

In Paris trading, the CAC-40 Index gained 23.49 or 0.8% to 3,061.26 and in Frankfurt the DAX Index edged higher 52.43 or 0.8% to 6,368.12.

For the week, the CAC-40 Index fell 0.7% and the DAX Index declined 1.1%.

The yield on Spain’s benchmark 10-year bonds fell 6 basis points to 6.16%, and the yields on the 10-year Italian bonds declined 11 basis points to 5.70%.

Euro-zone Leading Index Falls

Euro-zone''s leading economic index fell in April, data released by the Conference Board showed today.

The leading economic index decreased to 104.8 in April from 105.6 in March.

German Sentiment to Remain Flat

German consumer confidence is likely to stay unchanged in June, a survey by market research group GfK showed today.

The consumer confidence index for June was at 5.7, unchanged from the revised reading of May.

Separately, the French consumer confidence index rose to 90 in May from the revised level of 89 in April, survey results from the statistics office Insee showed.

Spanish PPI Eases

Spain''s producer price inflation eased to 3.1% in April from 4.5% in March, revised up from 3.3%, data released by statistics office Ine showed.

Delphi to Acquire FCI Unit

Delphi Automotive offered to acquire the motorized vehicles division of FCI Group on a cash and debt-free basis in a transaction valued at €765 million or approximately $972 million.

The deal is expected to close before the end of the year. Delphi expects the transaction to be 24 cents accretive to 2013 earnings per share, excluding acquisition-related costs.

Japan Tobacco to Acquire Gryson

Japan Tobacco Inc. agreed to buy Gryson NV, a family-owned Belgian tobacco company, for €475 million or $595 million on a debt-free and cash-free basis. The deal is part of the Japanese company''s efforts to enhance its presence in Europe.

Gryson’s total sales volume is approximately 3,900 tons in 2011, an equivalent of 5.2 billion cigarettes.

Gainers & Losers

Hochtief AG rose 0.6% to €37.30 after the construction company said that a consortium reached the financial close for the Northeast Anthony Henday Drive project in Edmonton, Alberta, Canada. The public-private partnership will design, build, operate and partially finance the project at an overall contract value of €1.39 billion or C$1.81 billion, over 34 years.

InterContinental Hotels Group Plc climbed 1.1% to 1,421 pence after the hotel company said its chairman David Webster will retire at the end of the year.

Interserve PLC increased 2.1% to 283.30 pence after the construction and maintenance firm announced progress on two contracts in the north of England.