Euro Zone Output Falls, UK Home Prices Slump

Arthi Gupta
20 Aug, 2012
New York City

The European indexes rose and the ECB may set yield limits for sovereign bonds. Construction output in the euro zone fell in June. UK home prices slumped in August. Heineken raised its offer to acquire Fraser & Neave''s stake in Asia Pacific Breweries.

[R]1:45 PM Frankfurt – The European indexes rose and the ECB may set yield limits for sovereign bonds. Construction output in the euro zone fell in June. UK home prices slumped in August. Heineken raised its offer to acquire Fraser & Neave''s stake in Asia Pacific Breweries.[/R]

European indexes edged higher in early morning trading as traders and political leaders return from vacation. President of Greece is scheduled to visit Berlin this Friday and the leader of the euro zone is expected to visit Greece as early as tomorrow.

Greece is likely to demand additional time and relaxing of austerity measures as the nation battles depression like economic conditions and struggles with record high unemployment and falling government receipts.

The European Central Bank is contemplating setting limits on yields of bonds of each euro member state at the governing council meeting in September, Germany''s Spiegel magazine reported without citing sources.

Greek Prime Minister Antonis Samaras is due to meet Luxembourg Prime Minister Jean-Claude Juncker, German Chancellor Angela Merkel and French President Francois Hollande this week to seek a two-year extension of the fiscal consolidation program.

In economic news, home prices in the United Kingdom declined but household finance index rose in August. Construction output in the euro zone dropped 0.5% in June.

In earnings news, Amlin swung to first-half profit and Bovis pre-tax profit for the half year soared 100%.

In Paris trading, the CAC-40 Index gained 13.41 or 0.4% to 3,501.79 and in Frankfurt the DAX Index edged higher 34.63 or 0.5% to 7,075.34.

The yields on Spain’s benchmark 10-year bonds fell 23 basis points to 6.16%. Italian 10-year yields dropped nine basis points to 5.72%.

Euro zone Output Falls

Seasonally adjusted construction output in the euro zone dropped 0.5% in June following a revised 0.2% drop in May, Eurostat reported today.

On a yearly basis, production fell 2.8% in June compared to the 8.1% drop a month ago.

UK Home Prices Slump

Home prices in the United Kingdom recorded the largest decline ever in August, property tracking Web site Rightmove said today.

The average asking price for a home in the United Kingdom fell 2.4% on a monthly basis in August to £236,260, following a 1.7% contraction in July.

On a yearly basis, home prices rose 2% in August following the 2.3% rise in July.

Separately, the UK household finance index rose for the third straight month in August, a survey from Markit Economics showed.

The index climbed to 38.9 in August, from 37.5 in July.

The surveyed households were less pessimistic about the outlook for their finances over the next 12 months. The index rose for the fourth month running to 43.5 in August, from 43.1 in July.

Dutch Sentiment Steady

Dutch consumer confidence remained stable in August, Statistics Netherlands said. The corresponding index came in at -32.

Assessment of past economic situation and future economic conditions fell to -67 and -36, respectively.

Heineken Lifts Offer for APB

Heineken NV, the Dutch brewer raised its offer to acquire Fraser & Neave Ltd.''s stake in Singapore-based Asia Pacific Breweries Ltd., for a total consideration of S$5.6 billion, an increase of S$307 million compared to Heineken’s previous offer made on July 20.

Heineken’s revised offer is S$53 a share for Fraser & Neave''s entire 39.7% direct and indirect stake in Asia Pacific Breweries, up from its previously announced S$50 a share.

The final offer represents a premium of 54% over the one-month volume weighted average price per APB share and the earnings multiple of 35, based on the last twelve months ending in June.

Heineken said it will not increase its final offer and believes that it provides compelling value to both F&N and APB shareholders.

Gainers & Losers

A.G.Barr p.l.c. gained 1.6% to 446.20 pence and the soft drinks manufacturer announced that John Nicolson would join the board as independent non-executive director from January 2013.

Amlin plc rose 2.5% to 390.70 pence after the insurer said first-half profit attributable to equity holders of the parent company of £168.9 million or 33.7 pence per share compared to a loss of £151.7 million or 30.7 pence per share last year. Net earned premium grew 7.4% to £987.7 million from £919.3 million.

Bovis Homes Group Plc rose 2.6% to 506 pence after the homebuilder reported first-half revenue increased 27% to £170.3 million from £133.6 million in the 2011 period. Pre-tax profit for the half year soared 100% to £16.2 million, from £8.1 million last year.

Michael Page International Plc fell 1.7% to 377.10 pence after a broker downgrade.

United Drug plc rose 0.04% to €2.45 after the healthcare services provider agreed to acquire the UK and US clinical services businesses from Bilcare Limited for $61 million.