IMF Approves

Arthi Gupta
17 Jul, 2012
New York City

The European indexes traded higher and Spanish bond yields fell at the latest debt auction. Rating agency downgraded 13 Italian banks with negative outlook. The IMF approved

[R]3:00 PM Frankfurt – The European indexes traded higher and Spanish bond yields fell at the latest debt auction. Rating agency downgraded 13 Italian banks with negative outlook. The IMF approved €1.48 billion aid to Portugal. German confidence fell to 6-month low in July.[/R]

European indexes traded higher across the region and investors looked for hints of any additional stimulus from the Fed.

The International Monetary Fund approved the disbursement of €1.48 billion to Portugal but Moody’s downgraded 13 Italian banks.

Spanish and Greek auctions were subdued but the countries sold debt at lower yields.

Moody''s Downgrades Italian Banks

Moody''s Investors Service downgraded by one to two notches the long-term debt and deposit ratings for ten Italian banks and the issuer ratings for three Italian financial institutions, prompted by the weakening of the Italian government''s credit profile.

The banks and financial institutions affected by the ratings cut have a ''negative'' outlook, which may increase the likelihood of future downgrades.

UniCredit SpA and Intesa Sanpaolo SpA are the two among the lenders that are downgraded.

IMF Approves Aid to Portugal

The International Monetary Fund approved the disbursement of €1.48 billion to Portugal after completing its fourth review of the country’s performance under an economic program supported by an extended fund facility arrangement, bringing total disbursements to €21.13 billion.

In Paris trading, the CAC-40 Index gained 12.47 or 0.4% to 3,192.58 and in Frankfurt the DAX Index edged higher 31.47 or 0.5% to 6,595.40.

The yields on Spain’s benchmark 10-year bonds rose 3.4 basis points to 6.763% and on Italian bonds climbed 1.2 basis points to 6.093%.

Policymakers at the Swedish central bank noted that the unease in Europe is casting a shadow over the Swedish economy, the minutes from Riksbank''s July meeting showed today.

At the monetary policy meeting on July 3, the Executive Board of the Riksbank decided to leave the repo rate unchanged at 1.50% and to adjust the repo-rate path downwards somewhat.

Spanish, Greek Bond Auction

The Spanish Treasury sold €3.56 billion of 12- and 18-month bills at lower borrowing costs in the first debt auction after the announcement of the austerity measures last week. However, the government is still forced to offer only short term debts and most of the participation in the auctions is from the local investors.

The country sold €2.6 billion of 12-month T-bills at an average yield of 3.918% compared to 5.074% paid in the previous auction on June 19. The bid-to-cover ratio fell to 2.23 from 2.16.

The agency also sold €962 million 18-month paper at an average yield of 4.242% from 5.107% in the previous sale on June 19. Demand was 3.66 times the offer compared to 4.42 times last month.

Separately, Greece raised €1.625 billion in an auction of three-month debt at an average yield of 4.28% compared to 4.31% last time, the national debt management agency said.

German Sentiment Slumps

German investor sentiment declined in July, results of a survey showed.

The ZEW Indicator of Economic Sentiment dropped to minus 19.6 points in July from minus 16.9 in June. The latest score was the lowest since January''s minus 21.6.

The current conditions index fell to 21.1 in July from 33.2 in June. The latest reading was the lowest since July 2010, when it was 14.6.

EU New Car Registrations Drop

European new car registrations continued to fall in June, the European Automobile Manufacturers'' Association reported today.

Passenger car registrations across the European Union member states, except Malta, dropped 2.8% from a year ago in June to 1,201,578 units, following an 8.7% slump in May.

Gainers & Losers

Alcatel-Lucent SA plunged 17.5% to $1.13 after the telecom equipment maker forecast second quarter adjusted operating loss of around €40 million and revenues above €3.5 billion.

Alfa Laval AB slumped 3.4% to SEK 117.20 after the specialized products and solutions producer reported second quarter net sales rose 7% to SEK 7.81 billion, excluding exchange rate variations. Net income in the quarter fell 11% to SEK 721 million or SEK 1.71 per share from SEK 811 million or SEK 1.92 per share a year before.

DEUTZ AG fell 1.5% to €3.41 after the diesel engines manufacturer said preliminary results for the second quarter indicate that the new orders totaled €310 million and revenue amounted to approximately €340 million.

Petroleum Geo-Services ASA rose 0.6% to $12.51 after the marine geophysical company estimates second quarter total revenues to exceed $395 million and pretax profit is expected to exceed $55 million.

Svenska Handelsbanken AB plunged 5.3% to 226.50 kroner after the bank reported second quarter profit increased 9% to 3.41 billion kroner or 5.34 kroner per share from 3.14 billion kroner or 4.95 kroner per share last year.