U.S. Investors Shift Focus to Spain after Greek Election

Arthi Gupta
18 Jun, 2012
New York City

U.S. indexes traded lower as Spanish yields rose to a record high. A pro-bailout party won majority of seats but not enough to form a government in Greece. The closely watched election failed to give majority to any party and the new government is expected to demand for bailout reliefs.

[R]9:45 AM New York – U.S. indexes traded lower as Spanish yields rose to a record high. A pro-bailout party won majority of seats but not enough to form a government in Greece. Yamana Gold agreed to acquire Extorre Gold Mines.[/R]

U.S. indexes declined on Monday morning after a much awaited results of Greek election showed a victory for a party that favors to stay in the euro zone. But the euphoria failed to excite investors as yields on Spanish bonds soared and reached a new high.

Investors also look ahead to the two-day meeting of the U.S. Federal Reserve's Open Market Committee which begins on Tuesday and housing starts report on Tuesday and the customary jobless claims report on Thursday.

The European indexes pared gains after the euphoria of the Greek elections waned.

The conservative pro-bail out New Democracy party led by Antonis Samaras squeezed a narrow victory over its left-wing opposition in the Greek parliamentary polls held yesterday. Antonis Samaras will now begin talks to form a coalition government.

Based on results from 99% of the votes counted, New Democracy won 30% of the votes or 129 seats and Syriza was second with 27% of the votes or 71 seats and Pasok secured about 12.3% of the votes or 33 seats in the 300-seat Parliament, according to Interior Ministry projections.

Separately, the European Central Bank's net lending to Spanish banks surged to an all-time high of €287.8 billion in May from €263.5 billion in April. Most Spanish banks are increasingly reliant on the central bank and do not have access to capital markets.

The Asian markets traded higher on optimism after the Greek election results. However, the Indian markets slumped after the Reserve Bank of India decided to leave its key interest rates unchanged with the repo rate at 8% and the reverse repo at 7%.

To add to investors’ woes, Fitch Ratings revised India's rating outlook to negative from stable today, citing limited progress on fiscal consolidation and, in particular, on reducing the central government deficit despite improvement in the financial health of state governments.

China's home prices continued to decline in May, with 54 out of 70 cities surveyed by the government showing home prices declining from a year ago, the National Bureau of Statistics said today. In April, prices declined in 46 cities.

On a monthly basis, home prices fell in 40 cities in May compared to 43 cities recording declines in April.

Molson Coors Completes Acquisition of StarBev

Molson Coors Brewing Company completed its previously announced acquisition of StarBev for approximately €2.65 billion.

Motorola Solutions to Acquire Psion

Motorola Solutions Inc., the provider of mission-critical communication solutions agreed to acquire London-based Psion plc for $200 million or £129 million.

Motorola offered to buy each Psion share for $1.36 or 88 pence, representing a premium of about 45% on the closing price of 60.5 pence per Psion share on June 14. The acquisition is expected to close in the fourth quarter.

Fairfax to Acquire Brit Insurance

Fairfax Financial Holdings Ltd, a Canadian financial services holding company said that its RiverStone runoff subsidiary entered into an agreement with Brit Group to purchase all the outstanding shares of Brit Insurance Limited of London.

The purchase price would be about $300 million, subject to certain adjustments at closing.

Yamana Gold to Buy Extorre Gold Mines

Toronto-based Yamana Gold Inc. agreed to acquire all of the issued and outstanding common shares of Extorre Gold Mines Ltd. The transaction value, net of cash and on a basic shares outstanding basis, is approximately C$395 million, representing approximately 3% of Yamana's pro-forma market capitalization.

Each Extorre shareholder will receive $4.26 per share comprised of $3.50 in cash and 0.0467 of a Yamana common share for each Extorre common share held.

Earnings Review

Benihana Inc. ((BNHN)) Friday said fourth quarter total revenues increased 12.8% to $92.3 million from $81.8 million in the same prior year quarter, driven by a 12.9% increase in total restaurant sales.

Net income in the quarter was $81,000 or break-even per share compared to net income of $298,000 or 2 cents per diluted share.

For fiscal 2012, total revenues increased 7.5% to $352.1 million from $327.6 million in the same prior year quarter, driven by a 7.5% increase in total restaurant sales.

Net income for the fiscal year 2012 was $3.6 million or $0.21 per diluted share compared to $251,000, or $0.02 per diluted share, in the 52-week prior year.

DSW Inc. ((DSW)), the branded footwear and accessories retailer today reiterated its 2012 outlook for the year ending February 2, 2013.

The company estimated comparable sales to increase between 3% and 5% for the full year and confirmed its previous guidance of earnings per diluted share of $3.25 to $3.40, excluding any impact from the RVI merger and related items.

Steel Dynamics Inc. ((STLD)), the steel producer and metals recycler estimates second quarter earnings between 15 cents and 20 cents per share. In the same quarter last year, the company reported earnings of 43 cents per share.