European Indexes Lower, Italian Debt Rating Lowered

Arthi Gupta
26 Jul, 2012
New York City

The European indexes fell on the speculation that Greece may not meet its deficit target. Moody''s changed outlook on 17 German banking groups to negative. Italy sold

[R]3:10 PM Frankfurt – The European indexes fell on the speculation that Greece may not meet its deficit target. Moody''s changed outlook on 17 German banking groups to negative. Italy sold €2.5 billion of zero-coupon bonds at higher yields. Alcatel-Lucent planned to cut 5,000 jobs.[/R]

European indexes edged lower as Greece may need yet another bailout to avert the burgeoning financial crisis and the largest euro zone bank Banco Santander said second quarter net plunged 93% as the bank was forced to increase reserves to cover home loans losses in Spain.

Banco Santander said it set aside €2.78 billion in the quarter to June to cover the rising losses from home loans in Spain. The bank also said loans that are in or near default increased one percentage point to 5.98%. Net income in the quarter declined to €100 million from €1.39 billion a year ago quarter.

In economic news, euro area M3 growth rose in June and German consumer confidence is expected to improve in August. UK retail employment climbed in the second quarter.

In earnings news, BASF confirmed its outlook for growth in fiscal 2012 but athletic shoemaker PUMA quarterly net fell 29%.

AstraZeneca plc and Royal Dutch Shell Plc reported a plunge in quarterly profit.

Moody''s Investors Service lowered its rating outlook on 17 German banking groups to ''negative'' following outlook change on German sovereign and sub-sovereigns.

Egan-Jones, the credit rating agency downgraded Italy''s sovereign debt rating to CCC+.

In Paris trading, the CAC-40 Index fell 5.02 or 0.2% to 3,077.48 and in Frankfurt the DAX Index edged lower 69.19 or 1.1% to 6,336.89.

The yields on Spain’s benchmark 10-year bonds plunged 30 basis points to 7.34% Italian 10-year yields fell 20 basis points to 6.44%.

Italian Bond Auction

Italy sold €2.5 billion in zero-coupon bonds due in May 2014 at an average yield of 4.86% compared to 4.71% at a similar sale a month ago. The bid-to-cover ratio was 1.78 from 1.65 a month ago.

Euro-zone M3 Growth Up

Euro-zone''s broad monetary aggregate M3 grew 3.2% in June from 3.1% in May, the European Central Bank said today.

The three-month average of the annual growth rates of M3 during April to June was at 3% compared with 2.9% in the period from March to May.

Separately, registrations of new commercial vehicles fell 5.8% from a year ago to 157,232 units in June, marking the fifth successive decrease in sales, data released by the European Automobile Manufacturers'' Association showed.

German Sentiment Set to Improve

German consumer confidence is set to rise modestly in August, according to a private institute GfK.

The market research group said its consumer confidence index for August rose to 5.9 from 5.8 in July.

In another report, Germany''s import price inflation eased to 1.3% annually in June from 2.2% in May, Destatis reported. On a monthly basis, import prices fell 1.5% in June.

UK Retail Employment Rises

Employment in the UK retail sector climbed in the second quarter driven the food sector, the British Retail Consortium said.

Retail employment rose 1.8% annually in the second quarter, the equivalent of 12,648 more full-time jobs.

The number of retail outlets in the UK dropped 0.5% annually in the June quarter.

Gainers & Losers

Alcatel-Lucent S.A. plunged 7.4% to €0.81 after the French telecom equipment maker said second quarter revenues dropped 7.1% to €3.55 billion. Net loss, group share was €254 million or 11 cents per share compared with a profit of €43 million or 2 cents per share a year ago.

AstraZeneca plc declined 0.7% to $45.45 after the drug maker reported second quarter revenue fell 21% to $6.66 billion. Pre-tax profit plunged 38% to $1.76 billion from $2.86 billion last year.

BASF SE dipped 0.9% to €55.64 after the chemical maker reported second quarter sales improved 6% to €19.5 billion and income from operations before special items increased by €253 million to €2.5 billion.

BG Group Plc slid 1% to 1,207.50 pence after the natural gas company said second quarter group revenue climbed 8.8% to $5.57 billion from $5.12 billion last year. Profit attributable to shareholders plunged 77% to $283 million from $1.243 billion in the prior year.

Banco Santander SA surged 7.2% to €4.37 after the lender said second quarter net profit plunged almost 93% to €100 million compared with €1.39 billion a year earlier.

British Sky Broadcasting Group plc climbed 1.2% to 693 pence after the pay-TV broadcaster said full year revenues rose 3% to £6.79 billion. Net profit for the year rose 12% to £906 million or 52.2 pence per share from £810 million or 45.9 pence per share in the previous year.

France Telecom SA fell 0.2% to $12.41 after the mobile operator reported first half revenue fell 1.9% to €21.843 billion. Consolidated net income declined 8.8% to €1.91 billion from €2.095 billion in the first half of 2011.

Puma AG soared 3.4% to €220.40 after the sporting equipment manufacturer said second quarter consolidated sales grew 11.8% in euro terms to €752.9 million. Net earnings decreased 29.2% to €26.7 million from €37.6 million a year before.

Earnings per share fell to €1.78 from €2.51 in the earlier year quarter.

Royal Dutch Shell Plc slumped 3.8% to 2,103.50 pence after the oil and gas explorer reported second quarter revenue declined 3.5% to $117.07 billion from $121.26 billion last year and income attributable to shareholders slumped 53% to $4.06 billion.

Siemens AG fell 3.2% to €65.14 after the German industrial conglomerate said third quarter revenue rose 10% annually to €19.542 billion. Net income attributable to the company''s shareholders increased to €823 million from €462 million in the prior year. Earnings per share advanced to 93 cents from 52 cents.

Unilever plc surged 4.3% to 2,232 pence after the packaged food maker said first-half revenues increased 11.5% to €25.4 billion. Profit attributable to shareholders'' equity rose 2.7% to €2.18 billion or 75 cents per share compared to €2.24 billion or 77 cents per share in the prior-year period.