Troika to Revisit Greece in September, UniCredit Net Plunges 67%

Arthi Gupta
06 Aug, 2012
New York City

The European indexes traded higher and Greek negotiations enter the next phase. Italy is set to approve additional spending cuts and investors speculated on the Spanish bailout. The UK home prices fell, German construction sector and the EU productivity declined.

[R]2:30 PM Frankfurt – The European indexes traded higher and Greek negotiations enter the next phase. Italy is set to approve additional spending cuts and investors speculated on the Spanish bailout. The UK home prices fell, German construction sector and the EU productivity declined.[/R]

European indexes extended gains of Friday’s advance and Greek leader and troika negotiators concluded a week long assessment of the country’s progress in meeting the bailout terms.

Greek government agreed to stay on track to save €3 billion in 2012 and additional €10 billion in 2013 and 2014.

The breakdown of the total savings is expected to be identified before the return of troika auditors in September. At least for now, the election time pledge of seeking relaxed terms of additional bailout were put aside by Prime Minister Antonis Samaras.

Separately, Spanish Prime Minister Mariano Rajoy appears to be preparing to ask for a larger bailout from the European Union as the nation struggles with rising debt yields. Spanish bond yields have hovered near critical 7% level and region government finance continues to deteriorate as unemployment stays near the record level in the currency union.

The Italian Prime Minister Mario Monti said in an interview with German magazine Der Spiegel that the debt crisis risks the future of the single-currency bloc. He also said in his comments that Italy is looking for “moral support” from Germany and not financial support and reminded that Italy has not asked for any bailout from the European Union.

Separately, Monti called for a confidence vote in the lower house of parliament to pass the €4 billion of cuts that were approved by a confidence measure in the upper house. The new measures include spending cuts in healthcare and public workers payroll and increase sales tax by 2 percentage points.

The measure is expected to pass the lower house by Wednesday.

In economic news, the UK home prices fell but new car registrations rose in July. The EU productivity declined for the fourth month running in July but the euro zone investor confidence declined for the fifth straight month in August.

In earnings news, UniCredit second quarter profit plunged 67% impacted by loan loss provisions.

In Paris trading, the CAC-40 Index gained 16.09 or 0.5% to 3,390.28 and in Frankfurt the DAX Index edged higher 48.87 or 0.7% to 6,913.88.

The yields on Spain’s benchmark 10-year bonds eased 10 basis points to 6.74%. Italian 10-year yields fell six basis points to 5.99%.

EU Productivity Declines

The EU productivity declined for the fourth month running in July.

The seasonally adjusted EU Productivity PMI registered 48.6 in July, up from 48.3 in June.

Separately, the euro zone investor confidence declined for the fifth straight month in August, data released by think tank Sentix showed today.

The investor sentiment index fell 0.7 points to -30.3 in August.

However, the expectations index rose to -23.3 in August from -24 in July and the current conditions fell to -37 in August from -35 in July.

UK Home Prices Drop

Home prices in the United Kingdom decreased in July, data from Lloyds Banking Group''s Halifax division showed today.

The home price index fell 0.6% on a monthly basis in July, following two consecutive increases in May and June.

Separately, new car registrations in the United Kingdom increased in July, data released by the Society of Motor Manufacturers and Traders showed.

Sales of new passenger cars increased 9.3% from last year to 143,884 units in July, marking the fifth monthly gain in a row.

German Construction Sector Shrinks

German construction sector contracted in July, the latest report from Markit Economics showed.

The seasonally adjusted purchasing managers'' index, that measures the performance of the construction sector, fell to 44.6 in July from 46 in June.

Gainers & Losers

ASML Holding NV declined 0.7% to €46.79 after the advanced technology systems provider said that TSMC is investing €276 million in research and development of next generation lithography technologies as well as €838 million in a 5% ASML equity stake.

Basler AG climbed 0.4% to €11.27 after the machine vision technology manufacturer reported first-half sales declined 10% to €25.2 million. The new order bookings orders fell 5% to €28.7 million from €30.2 million a year before.

Compagnie Financiere Richemont AG soared 5.2% to Sfr 58.95 after the Swiss luxury goods group reported sales for the four months ending in July climbed 24% on a reported basis against the comparative period.

easyJet plc rose 0.1% to 573 pence after the low-cost airline said total passenger count grew 8% to 5.86 million in July from 5.43 million in the previous year. Load factor in July grew 0.8 percentage points to 92.5%.

Marks & Spencer Group PLC gained 2.1% to 348.40 pence after the British retailer became the latest subject of takeover speculation this weekend.

UniCredit S.p.A. fell 0.9% to €2.77 after the Italian bank said second quarter revenues declined 3.2% to €6.25 billion from last year. Net income for the quarter plunged 67% to €169 million compared to €511 million last year.