European Markets Worry of Larger Spanish Bailout

Arthi Gupta
25 Jun, 2012
New York City

European markets were on the edge on the first day of trading as the leaders in the region prepare to gather to finalize the region wide banking integration. Spain requested formally for a bank aid and the prospect of a larger bailout loomed.

[R]1:05 PM Frankfurt – European markets were on the edge on the first day of trading as the leaders in the region prepare to gather to finalize the region wide banking integration. Spain requested formally for a bank aid and the prospect of a larger bailout loomed.[/R]

European markets declined as the slow moving crisis in the euro zone festers and the leaders in the region gather on Thursday to discuss tighter banking and fiscal union.

Spain submitted an official request for financial aid to recapitalize banks today but left out the exact amount of aid and finance minister said in a letter that the estimates of the IMF and two independent consultants are a good baseline to work from.

The Spanish Economy Minister Luis De Guindos formally requested assistance for the country’s banks in a letter sent to Eurogroup President Jean-Claude Juncker.

An independent audit conducted by two consultants showed that Spanish banks may need as much as €62 billion in additional capital. European authorities have already offered €100 billion assistance for Spanish banks.

Finance Minister De Guindos also said he intends to sign a memorandum of understanding for the financial assistance with details completed before the next meeting of finance ministers on July 9.

However, Spain hopes that by the time European leaders agree on the size of the capital injection and terms of loans in the next two months, the decision on the euro wide deposit guarantee, greater role in supervising banks by the European Central Bank and other banking related measures will be finalized.

Spain is the fourth and largest European nation to seek financial aid in addition to Greece, Ireland and Portugal. Spain prefers the bank bailout to be sent directly to banks and not increase its debt as the nation struggles with weakening economy and elevated unemployment.

The Greek Prime Minister Antonis Samaras will not attend this week''s crucial European Union summit in Brussels as he is recovering from an eye surgery. Greece''s foreign minister Dimitris Avramopoulos will head the Greek delegation to the meeting.

The troika was expected to visit to Athens today but postponed it due to Samaras'' ill-health.

In Paris trading, the CAC-40 Index declined 45.62 or 1.5% to 3,045.62 and in Frankfurt the DAX Index edged lower 88.53 or 1.4% to 6,174.09.

The yield on Spain’s benchmark 10-year bonds rose nine basis points to 6.44%. Italian 10-year yields climbed seven basis points to 5.88%.

Spanish PPI Climbs

Spain''s producer price inflation rose to 3.2% annually in May from 3% in April, the statistics office INE said today.

On a monthly basis, producer prices eased 0.1% in May compared to the 0.8% decline recorded in April.

B/E Aerospace to Acquire Interturbine

B/E Aerospace agreed to acquire Interturbine Aviation Logistics GmbH, Interturbine Logistics Solutions GmbH, and Interturbine Technologies GmbH for approximately €200 million in cash.

The transaction is expected to close during the fourth quarter.

Gainers & Losers

Anheuser-Busch InBev SA rose 1.5% to €56.44 after media reports suggested that the brewer is in talks to buy the remaining stake which it does not hold in Mexico''s Grupo Modelo SAB de CV for more than $12 billion.

Banco Santander SA fell 2.1% to €4.91 after the Spain-based financial institution closed the second phase of the sale of Banco Santander Colombia SA and its subsidiaries for €484 million or $605 million, and a total of €983 million or $1,229 million.

Technip SA dipped 0.2% to €76.47 after the oil servicing company was awarded contract for EnQuest’s Alma and Galia development in UK North Sea.

Vestas Wind Systems A/S climbed 0.6% to DKK 30.49 after the Danish wind turbine maker decided to phase out the production of the kilowatt platform, including the V52-850 kW and V60-850 kW turbines produced at its factory in Hohhot, China, and layoff between 300 and 350 employees.