Wall Street Looks Beyond Greek Crisis

Arthi Gupta
25 May, 2012
New York City

U.S. indexes declined on rising worries in Europe. Bank of America and Barclays agreed to sell their remaining stake in Archstone to Lehman for $1.58 billion. Citigroup completed sale of equity interest in Turkey-based Akbank for $1.15 billion.

[R]9:35 AM New York – U.S. indexes declined on rising worries in Europe. Bank of America and Barclays agreed to sell their remaining stake in Archstone to Lehman for $1.58 billion. Citigroup completed sale of equity interest in Turkey-based Akbank for $1.15 billion.[/R]

Stocks in New York traded higher as confidence index in Germany and France showed an unexpected strength but banks in Spain took another hit after the recently merged largest housing lender was suspended from trading.

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.

The euro gained ground today after the latest read on consumer confidence in Germany and France showed an unexpected strength.

Spanish market regulators suspended trading in the troubled housing lender Bankia. The recently merged entity was suspended ahead of the key board meeting today that is likely to decide the size of capital injection that may dilute shareholders.

Asian markets closed mixed and the market index in Tokyo fell for the eighth week in a row and the benchmark index in Australia turned negative for the year. The index in India struggled to hold gains of the year but trimmed the gains to 4.5% from the rise of 16% in the first quarter.

Core consumer prices in Japan rose 0.2% from a year ago in April, according to a report released by Japan''s Ministry of Internal Affairs and Communication today. The headline inflation rate was 0.4%.

BofA, Barclays to Sell Remaining Interest in Archstone

Bank of America Corp. and Barclays Bank Plc will sell their remaining 26.5% interest in Archstone, a developer of multifamily apartment properties for $1.58 billion to Lehman.

Upon consummation of this transaction, which is anticipated to close by the end of June, Bank of America and Barclays sold a 53% controlling interest in Archstone in two steps for a total purchase price of $2.905 billion.

Citigroup Completes Stake Sale in Turkish Bank

Citigroup Inc. sold 404 million common shares in Turkey-based Akbank T.A.S. through an equity offering representing 10.1% of the equity interest in the company for TRY5.24 per share.

Total proceeds from the transaction are estimated around $1.15 billion resulting in an after-tax loss of around $243 million in the second quarter.

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.

Earnings Review

Mentor Graphics Corp. ((MENT)), the electronic design automation systems supplier reported first quarter total revenues grew 7.8% to $247.92 million from $230.04 million in the same quarter last year. Net income in the quarter swung to $28.18 million or 25 cents per diluted share compared to a net loss of $2.35 million or 2 cents per share in the prior-year quarter.

rue21, inc. ((RUE)), the specialty apparel retailer reported first quarter sales rose 19% to $205.6 million compared to $173 million last year. Same-store sales grew 1.7%. Net income in the quarter climbed 21% to $11.6 million or 46 cents per diluted share compared to net income of $9.6 million or 38 cents per share last year.

Semtech Corporation ((SMTC)), the semiconductor company said first quarter sales dipped 4.7% to $116.6 million compared to $122.4 million last year. Net income in the quarter plunged 90% to $2.2 million or 3 cents per diluted share compared to net income of $22.6 million or 34 cents per share last year.

VeriFone Systems Inc. ((PAY)), the secure electronic payment solutions provider said second quarter net revenue rose 61% year-over-year to $472.02 million compared to $292 million last year. Net income in the quarter fell 42.5% to $14.5 million or 13 cents per diluted share compared to net income of $25.2 million or 27 cents per share for the year-ago quarter.