Banks Soar in Europe; Daimler Raises

123jump.com Staff
23 Mar, 2009
New York City

Banks rally on U.S. Treasury plan to purchase sour toxic debt. Daimler AG, the second largest German auto company raised nearly 2 billion euros from a fund based in Abu Dhabi. The move to raise capital at a price when the stock is down more than 50% only highlights dire cash needs at Daimler.

[R]1:00PM New York, 6:00 Frankfurt – Banks lift European markets. The euro climbs higher against dollar. Daimler AG, the second largest German auto company raised nearl 2 billion euros from a fund based in Abu Dhabi.[/R]

Financials and consumer sensitive stocks rose in Europe after the US treasury laid out plans to deal with toxic assets in a public-private partnership that may be able to purchase as much as $1 trillion of debts.

The euro closed up $1.3526.

The European Union statistics office in Luxembourg today reported that European exports to the US and the UK, the region’s largest export markets, slumped in 2008.

The IMF also warned that unemployment may continue on an upward trend.

Market Sentiment

In Frankfurt trading the DAX 30 Index climbed 2.7% or 107.63 to 4,176.06.

Deutsche Bank led advancers with a gain of 10% followed by gains in Commerzbank of 9.3%, in Allianz SE-REG of 7.9%, in Deutsche Lufthansa of 7% and Man AG of 6.3%.

In Paris trading of the index CAC 40 shares 4 fell and 36 rallied driving the index 2.8% higher to 2,869.57.

BNP Paribas, the largest bank in France led advancers with a gain of 8.3%, followed by gains in insurer, AXA, of 6.2%, in EDF of 6.1%, in Societe Generale of 5.7% and Dexia of 5.5%.

PPR led decliners with a loss of 3.1% followed by losses in CAP Gemini of 1.9%, in LVMH of 1.2% and Peugeot of 1.1%.

EU Exports to the US and UK Contracted

The European Union statistics office in Luxembourg today reported that export shipments from the 27-nation economic bloc to the US and the UK slumped in 2008. The UK is the Europe’s largest export market, followed by the US.

According to the report, both the UK and the US cut their orders from the euro region 4% in the period.

Daimler Raises Funds in Abu Dhabi

Daimler AG, the second largest German auto maker agreed to sell nearly 9.1% stake in the company to a fund based in Abu Dhabi, UAE in exchange of 1.95 billion euros.

Daimler sold 96.4 million shares at 20.27 euros to Aabar Investments PJSC, a 5% discount to Friday’s closing price.

The Aabar stake in the luxury car maker will exceed the 6.9% stake controlled by Kuwait sovereign fund. The fund leader Khadem al-Qubaisi in a joint press conference with Daimler CEO Dieter Zetsche said that the fund may increase stake in the company in future and will not interfere in the company operation.

The sale of stock at 55% discount from October price only highlights the dire need of cash at the company.

Daimler AG has suffered in the current global economic recession but its rival BMW has suffered less. Daimler also continues to need more capital as still weans itself away from the disastrous investment in the U.S. Chrysler LLC.

Euro Climbs on US Plan to Buy Bank Toxic Assets

The euro firmed against the dollar as investors bought euros after the U.S. proposed public-private partnership to purchase illiquid mortgage debts.

The partnership relies on private companies and private equity funds participating in a series of auction to purchase hard to value mortgage based debts. The plan calls for a debt availability to purchasers of as much as six times the amount of equity.

Currency traders are speculating that the ECB may resort to printing currency and lower interest rate if credit markets remain tight and debt markets do not unfreeze.