Mix European Markets, Nestle Rises

123jump.com Staff
19 Feb, 2009
New York City

European market indexes closed mixed after a string of weak earnings. Germany is planning to provide financial assistance to troubled banks and countries in the Eastern European region. Nestle rose after it reported better than expected earnings.

[R]1:00PM New York, 6:00 Frankfurt – European stocks were mixed. Nestle gained after it reported earnings. [/R]

European stocks traded mixed after a streak of disappointing corporate earnings. Germany is likely to offer financial assistance to Eastern European countries and the World Bank urged the EU to offer similar help to struggling banks in the region.

Nestle, the world’s largest manufacturer of food products, rallied after reporting strong growth in 2008 earnings and sales that surpassed expectations.

BNP Paribas SA, the largest bank in France and the fifth largest in Europe reported a fourth-quarter loss of 1.37 billion euro for 2008 compared to a 1.01 billion euro profit in 2007.

The group’s investment banking division suffered its first quarterly deficit as a result of the global financial crisis and exposure to the collapse of Lehman Brothers Holdings Inc and the Madoff fraud.

Deutsche Post Bank AG also posted a fourth-quarter loss of 710 million euros against 166 million euros in 2007.

UBS rose 3% in Zurich trading after it agreed to pay a fine of $780 million for assisting its clients to evade taxes in the US.

Market sentiment

In Frankfurt trading the DAX Index gained 0.2% or 10.25 to 4,215.21. Of the DAX Index shares, 17 gained, 12 lost and 1 traded unchanged.

Deutsche Postbank AG led advancers with a gain of 7.2% after reporting its earnings today, followed by gains in MAN AG of 6%, in E.ON AG of 3.2% in RWE AG of 3.1% and Muenchener Rue-R of 2.7%. MAN AG climbed after Europe’s third-largest truck manufacturer revealed it had secured credit to acquire Volkswagen AG’s Brazil operations.

Infineon Tech led decliners with a loss of 4.7% followed by losses in SAP AGF of 3.3%, in Merck KGAA of 2.6%, in Salgitter AG of 1.4% and Adidas AG of 1.3%.

In Paris the CAC-40 index closed down 0.05% to 2,872.60.

PPR led advancers with a gain of 7.2%, followed by gains in Shnneider Electric of 4.6%, in Saint Gobain of 4.07%, in Societe Generale of 3.5% and Credit Agricole of 4.4%.

Insurance group, Axa led decliners with a loss of 9.1% followed by losses in Dexia of 3.4%, in Bouygues of 3.1%, in ST Microelectronics of 3.1% and Arcelormittal of 2.9%.

Germany pledges assistance to Eastern Europe

Germany has pledged support to distressed Eurozone economies that are grappling with budget deficits and debt refinancing.

Responding to questions raised during a press conference yesterday, Germany finance minister Peer Steinbrück said the country was ready to assist in order to contain the knock-on effects of the economic meltdown in the former Soviet states on western Europe.

The global economic slowdown has had its worst effects in the 16-country region and any further economic woes will have severe implications for the stability of the euro and the EU economy in the medium to long-term.

Several countries in the region have approached the International Monetary Fund for assistance. The European Commission has already issued a warning to Greece and Ireland about the dangers of running persistent budget deficits.

Earnings Summaries

Nestle, the largest manufacturer of food products in the world, today reported a 69% growth in full-year pre-tax profit to 18 billion francs or $15.35 billion, representing a net profit margin of 16.4%. This included a profit on disposal of 9.2 billion francs from the sale of 25% of Alcon to Novartis in July.

Earnings per share grew 75% to 4.87 francs, while underlying earnings per share rose 1% reported, and 11% in constant currencies.

During the review period, underlying sales grew 8.3% on strong organic growth. Consolidated sales for the group also increased 2% 11 billion francs relative to the year before.

The group said though the outlook for consumer demand and sales was negative, continuous innovation and renovation of products and brands would sustain performance.

Nestle also revealed plans to embark on a 25 billion frank share buy-back after another one in 2008.

BNP Paribas SA, the largest in France and fifth largest in Europe reported full year net income for 2008 declined to 3,924 million euros from 11,058 million euros in 2007.

Revenue during the year, group revenue fell 12% to 27,376 million euros compared to the year before.

In the fourth quarter of the year, BNP reported a loss of 1.37 billion euros compared to a 1.01 billion euro profit in 2007.

The group attributed the slump to the collapse of Lehman Brothers Holdings Inc in September, which affected portfolio investments and insurance units, reduced market liquidity and increased defaults by mono-line insurers and exposure to the Madoff fraud.

As a result the group’s investment banking division suffered its first quarterly deficit.

Europe Markets Review

In London FTSE 100 Index closed higher 11.54 or 0.29% to 4,018.37, in Paris CAC 40 Index decreased 1.47 or 0.05% to close at 2,872.60 and in Frankfurt DAX index higher 10.25 or 0.24% to close at 4,215.21. In Zurich trading SMI increased 35.05 or 0.71% to close at 4,990.52.