Markets Support ECB Plan, Glencore Sweetens Xstrata Bid

Arthi Gupta
07 Sep, 2012
New York City

The European indexes jumped and world markets advanced after the central bank plan to support the euro. German production rebounded in July. Glencore sweetened bid for Xstrata Plc. KfW Bankengruppe sold 5% stake in Deutsche Post. BMW registered record August sales.

[R]3:00 PM Frankfurt – The European indexes jumped and world markets advanced after the central bank plan to support the euro. German production rebounded in July. Glencore sweetened bid for Xstrata Plc. KfW Bankengruppe sold 5% stake in Deutsche Post. BMW registered record August sales.[/R]

European markets extended gains for the second day in a row after European Central Bank offered to buy unlimited amount of euro bonds.

The widely anticipated move for now calmed the market sentiment and lifted worldwide indexes and the euro edged higher as bond yields of Spain and Italy turned lower.

However, the reaction in German media was unanimously negative even though German Chancellor Angela Merkel supported the central bank policy.

The central bank will carry out its plan to accumulate more peripheral nation’s bonds with maturities no more than three years and dropped its status of a preferred creditor status but will also require a formal request from the nations that could pose problem for the borrowing country.

The new plan by the central bank is called Outright Monetary Transactions.

World markets surged highlighting the importance of the widening euro zone crisis and markets in Asia and in Americas soared at least 2%.

In Paris trading, the CAC-40 Index gained 43.41 or 1.2% to 3,553.21 and in Frankfurt the DAX Index edged higher 67.98 or 1% to 7.236.73.

For the week, the CAC-40 Index soared 4.1% and the DAX Index surged 17.8%.

The yields on Spain’s benchmark 10-year fell 28 basis points to 5.75%. Italian 10-year yields dropped 15 basis points to 5.11%.

German Output Rebounds

German industrial production rebounded 1.3% in July from a month ago, following a 0.4% drop in June, the Federal Ministry of Economy and Technology said.

From a year ago, working-day adjusted industrial output declined 1.4% in July, from the 0.3% rise in June.

German Exports Rise

Germany''s exports and imports rose unexpectedly in July, data from Destatis showed.

Exports climbed 0.5% from a month ago in July, from the 1.4% drop in June. Imports rose 0.9% in July following a 2.9% decline in June.

The trade surplus dropped to €16.9 billion in July from €18 billion in June.

Greek Contraction Eases

The unadjusted gross domestic product, at constant prices decreased 6.3% annually in the second quarter compared to the 6.2% decrease recorded in the preliminary estimates and slower than the 7.5% contraction in the first quarter, final data from the Hellenic Statistics Authority showed.

The external trade deficit decreased 39.9%, contributing positively to the GDP percent change.

KfW Sells Stake in Deutsche Post

KfW Bankengruppe, the largest shareholder of Deutsche Post AG, announced that it completed the sale of 60 million shares for €15.40 each.

Following this placement, Deutsche Post''s free float would increase from approximately 69.5% to around 74.5%. However, KfW will remain Deutsche Post AG’s largest shareholder with an aggregate holding of approximately 25.5%.

Gainers & Losers

Air France-KLM SA climbed 2.7% to €4.26 after the Franco-Dutch airline reported a 0.6% growth in August passenger traffic to 20.925 billion revenues pax-kilometers, from 20.805 billion last year. Available seat-kilometers capacity climbed 0.6% to 24.42 billion from 24.26 billion a year ago.

Total group''s load factor dipped to 85.7% in August compared with 85.8% in August 2011.

BMW AG rose 2.2% to €58.5 after the automobile manufacturer said total sales for August increased 9.7% to a record 121,615 units from 110,903 units in the same month last year.

Since the beginning of the year, the company delivered 1,157,777 vehicles worldwide, an increase of 7.9% compared with the first eight months of the previous year when it delivered 1,073,395 vehicles.

Deutsche Post AG declined 3.7% to €15.4 after KfW Bankengruppe cut its holding in the logistics services provider by 5%.

Glencore International plc slumped 3.9% to 377 pence after the commodities trader lifted its offer for Xstrata Plc. Glencore is now offering 3.05 of its own shares for each Xstrata share in comparison to the 2.8 shares on offer.

In addition, Glencore''s CEO Ivan Glasenberg will take the helm at the combined company.