Greece Wins Bailout Release, Bank Worries Resurface

Arthi Gupta
22 Jun, 2012
New York City

The European indexes slumped after German business confidence fell to a two-year low in June. Fifteen large U.S. banks were downgraded by a rating agency that many analysts viewed an action four years too late.

[R]1:30 PM Frankfurt – The European indexes slumped after German business confidence fell to a two-year low in June. Fifteen large U.S. banks were downgraded by a rating agency that many analysts viewed an action four years too late.[/R]

European markets edged lower after German business confidence dropped and banks were in focus in Spain and in the U.S. with global operations. The euro zone finance ministers released the next bailout tranche to Greece after a meeting in Luxembourg.

The political turmoil in Greece eased after Greek Prime Minister Antonis Samaras formed a new cabinet on Thursday with new ministers mostly from his conservative New Democracy party. The socialist Pasok and Democratic Left parties have only one minister each in the 18 member cabinet to keep distance from the new government.

Vassilis Rapanos, the chairman of the National Bank of Greece, is appointed as the Finance Minister.

Euro zone ministers approved to extend to Greece the remaining €1 billion of the first installment under the second bailout by month end.

The Eurogroup Chairman Jean-Claude Juncker said the so called troika of International Monetary Fund, the European Commission and the European Central Bank are to visit Athens next Monday to review the implementation of the deficit cut program.

Spain is expected to submit an official request for financial aid to recapitalize banks by Monday.

An independent audit conducted on the Spanish banks showed that the banks would need up to €62 billion in extra funding. European authorities have already offered €100 billion assistance for Spanish banks.

On the second day of the euro area finance ministers meeting in Luxembourg leaders are scheduled to discuss the financial transaction tax.

Separately, the leaders of Germany, France, Spain and Italy are set to hold a meeting in Rome later today before the full meeting of 27 EU member nations next week.

Moody''s Lowers Credit Ratings

Ratings agency Moody''s Investors Service on Thursday downgraded the credit ratings of 15 banks and securities firms with global capital markets operations. The largest European banks affected by the ratings downgrade are Barclays, Credit Suisse, Deutsche Bank, UBS and HSBC.

In Paris trading, the CAC-40 Index declined 27.23 or 0.9% to 3,086.43 and in Frankfurt the DAX Index edged lower 65.47 or 1.0% to 6,277.56.

For the week, the CAC-40 Index fell 1% and the DAX Index gained 2.2%.

The yield on Spain’s benchmark 10-year bonds rose eight basis points to 6.69% and Italian 10-year yields climbed five basis points to 5.80%.

German Business Confidence Slumps

Germany''s business sentiment slumped in June, according to the latest survey results from Ifo Institute.

The business confidence index fell to 105.3 in June from 106.9 in May. That’s the lowest reading since March 2010.

Euro-zone Confidence Drops

Euro-zone consumer confidence declined less-than-estimated in June, preliminary data released by the European Commission showed today.

The flash consumer confidence indicator dropped to -19.6 in June from the -19.3 in May.

Swiss 2012 Growth Estimates

Switzerland''s economy is projected to grow 1.2% in the current year, the KOF institute said in its summer forecast released today.

The KOF expects exports to grow 2.3% and imports to increase 4.4%.

Gainers & Losers

BHP Billiton Limited plunged 5.3% to $63.14 after the diversified natural resources company approved investment of $845 million to sustain operations at Illawarra Coal in southern New South Wales by establishing a replacement mining area at the Appin Mine.

Clariant AG slumped 4% to Sfr 9.88 after the Swiss specialty chemicals maker aims to grow its operating margin to above 17% in 2015 from 13.2% in 2011.

Technip SA fell 3% to €77.77 after the provider of project management, engineering, and construction services for the oil and gas industry was awarded a services contract for the Ichthys floating production storage and offloading.

Tenaris S.A. decreased 3.3% to $33.47 after the supplier of tubes announced an investment plan to expand its U.S. operations. The plan includes the installation of a state-of-the-art seamless pipe mill, heat treatment and premium threading facilities with an estimated investment of $1.5 billion.