European Central Banks Prepare for Greek Outcomes

Arthi Gupta
15 Jun, 2012
New York City

The European indexes gained on hopes of a coordinated joint action from central banks. Ratings agency downgraded five Dutch banking groups. Carrefour agreed to sell its ownership in the Carrefour Marinopoulos joint venture.

[R]1:30 PM Frankfurt – The European indexes gained on hopes of a coordinated joint action from central banks. Ratings agency downgraded five Dutch banking groups. Carrefour agreed to sell its ownership in the Carrefour Marinopoulos joint venture.[/R]

European markets rallied ahead of the Greek election Sunday as investors prepare for all possible outcomes and traders focused away from the Greek election to the possible regulatory response and the impact on the economies of the region.

Investors are increasingly taking optimistic view that regulators and bankers are at least prepared to calm markets and Greek exist from the euro zone is months away even if Greece elects a party that chooses to leave.

The investor sentiment was buoyant on the hopes that the central banks are prepared to inject significant liquidity in the event Greek outcome leads to market chaos.

Yields on the Italian and Spanish bonds backed off from near record highs but traders were jittery after ratings agency downgraded five Dutch banking groups.

In Paris trading, the CAC-40 Index gained 30.86 or 1.0% to 3,063.31 and in Frankfurt the DAX Index edged higher 44.14 or 0.7% to 6,183.35.

For the week, the CAC-40 Index rose 0.4% and the DAX Index advanced 0.6%.

The yield on Spain’s benchmark 10-year bonds eased 12 basis points to 6.84%, and the yields on the 10-year Italian bonds fell 10 basis points to 6.06%.

Euro-zone Surplus Falls

The euro area trade surplus fell to €5.2 billion in April from €7.5 billion in March, Eurostat said today compared to a deficit of €4.5 billion.

Euro-zone Employment Slides

The euro area employment decreased a seasonally adjusted 0.2% sequentially in the first quarter after falling revised 0.3% in the fourth quarter.

In the wider EU27 region, employment was unchanged on a quarterly basis after edging down 0.1% in the previous quarter.

Dutch Banking Groups Downgraded

Moody''s Investors Service downgraded the long-term debt and deposit ratings for five Dutch banking groups.

The long-term debt and deposit ratings for four groups declined by two notches: to Aa2 for Rabobank Nederland, to A2 for ING Bank N.V., to A2 for ABN AMRO Bank N.V., and to Baa2 for LeasePlan Corporation N.V. The long-term debt and deposit ratings for SNS Bank N.V. were downgraded by one notch to Baa2.

The short-term ratings for all aforementioned groups are unchanged, the agency said.

Gainers & Losers

Assicurazioni Generali SpA rose 1.9% to €9.52 after the Italian insurer announced that its newly appointed chief executive Mario Greco will join the board from August 1.

Carrefour SA climbed 1.8% to €13.92 after the retailer said it will sell its ownership in the Carrefour Marinopoulos joint venture to Marinopoulos Group and will record a non-cash charge of €220 million related to the sale.

Hennes & Mauritz AB gained 1.6% to SEK 223.50 after the apparel retailer said total sales including VAT in local currencies for May rose 12% compared to the same month a year ago. Sales in comparable units for the month increased 3%.

Telekom Austria AG advanced 2.3% to €8.22 after América Móvil S.A.B. de C.V. agreed to acquire 21% of the outstanding shares of the Austria-based telecommunications company.