European Leaders Step Up Pressure on Germany, CGI Acquires Logica

Arthi Gupta
31 May, 2012
New York City

The European indexes trimmed gains after inflation eased, German jobless rate fell and consumer confidence rose in UK. Canada-based CGI agreed to acquire Logica for

[R]4:00 PM Frankfurt – The European indexes trimmed gains after inflation eased, German jobless rate fell and consumer confidence rose in UK. Canada-based CGI agreed to acquire Logica for £1.7 billion. Swiss Re agreed to sell its U.S. unit to Jackson National Life for $621 million.[/R]

European markets traded higher after calls for joint fund to guarantee bank deposits in the region grew louder from the European officials and political leaders in Italy and Spain.

The European Commission’s leader Olli Rehn said that the euro zone needs stronger crisis fighting measures and tougher fiscal discipline and the European Central Bank stepped up pressures to set up the fund to protect depositors in the euro zone.

Ireland is set to approve in a referendum a European budget discipline treaty to continue receiving EU financial aid and leaders stepped up pressure on Germany to agree on a joint euro fund ahead of the summit in late July.

Bank of Italy Governor Ignazio Visco added his voice to the growing chorus of pressure on Germany and said political inertia and poor economic choices had put the “the entire European edifice” at risk.

He added in a keynote speech to the bank’s annual meeting high level of Italian taxes are incompatible with strong economic growth and urged the government to sell state assets to lower government debt.

In Paris trading, the CAC-40 Index climbed 1.77 or 0.1% to 3,017.35 and in Frankfurt the DAX Index edged higher 3.95 or 0.1% to 6,285.09.

The yield on Spain’s benchmark 10-year bonds fell 16 basis points to 6.49% and the yields on the 10-year Italian bonds declined seven basis points to 5.86%.

Euro-zone Inflation Eases

Euro-zone inflation eased to a 15-month low in May, flash estimates from Eurostat showed oday.

Annual inflation fell to 2.4% in May from 2.6% in April. However, inflation continues to stay above the European Central Bank''s ''below, but close to 2 percent'' target.

The statistics office is set to publish final data on June 14.

German Jobless Rate Falls

The number of unemployed in Germany remained unchanged in May, a report from the Federal Labor Agency showed.

Seasonally adjusted unemployment remained unchanged at 2.872 million in May. In April, the number of unemployed increased by a revised 18,000.

The unemployment rate edged down to 6.7% in May from 6.8% in April.

UK Consumer Confidence Climbs

Consumer confidence in the United Kingdom improved in May. The confidence index for May improved two points to minus-29 from the April reading of minus-31, according to the GfK NOP research group.

The index was at minus-21 one year earlier.

CGI to Acquire Logica

CGI Group Inc, a provider of IT and business process services in Canada agreed to acquire UK-based Logica for 105 pence equivalent to a total purchase price of £1.7 billion or C$2.8 billion plus the assumption of net debt of £322 million or C$515 million.

The offer price represents a premium of approximately 59.8% to Logica''s closing price on Wednesday.

For fiscal year 2011, Logica reported revenue of £3.9 billion and adjusted operating profit of £114 million.

Swiss Re Sells U.S. Unit

Swiss Re, the reinsurer said it would sell its US Admin Re holding company, Reassure America Life Insurance Co. to Jackson National Life Insurance, a unit of UK based Prudential Plc for $621 million or £398 million in cash.

Prudential expects the acquisition to be accretive immediately to its earnings.

Gainers & Losers

Kingfisher plc rose 1.8% to 281.20 pence after the home improvement retailer said first quarter total sales declined 3.6% to £2.63 billion. For the quarter, the company''s retail profit fell 8.6% to £160 million.

SAP AG, the business software maker increased 2% to €46.86 after a broker upgrade.

Tate & Lyle Plc fell 0.4% to 674.50 pence after the sweeteners maker reported fiscal year 2012 sales improved 14% to £3.09 billion. Profit before tax for the year soared 55% to £379 million from £245 million in the previous year.

Thomas Cook Group plc plunged 9.9% to 18.25 pence after the leisure travel company reported first-half revenue increased 2.6% to £3.52 billion from £3.43 billion in the prior year. Pre-tax loss for the first-half widened 165% to £712.9 million from £269.4 million.