Weak European Markets; Daimler, Air Liquid Fall

123jump.com Staff
28 Apr, 2009
New York City

Stocks in Germany and France declined after markets worried on the impact of deepening spread of flu virus in Europe and North America. Daimler reported second quarterly loss in a row. Weak outlook at Air Liquid dragged French markets lower. Arcandor, TUI and Euro Disney drop.

[R]9:40PM Frankfurt – Stocks in Germany and France declined after markets worried on the impact of deepening spread of flu virus in Europe and North America. Daimler reported second quarterly loss in a row. Weak outlook at Air Liquid dragged French markets lower.[/R]

The health organization in its alert cited that more than 150 people in Mexico have died and the flu can no longer be contained. The alert, set up since 2005 was raised to phase 4 indicating sustained human to human transmission. The next phases 5 and 6 in alert represent widespread human infection.

The alert noted, “Given the widespread presence of the virus, the Director-General considered that containment of the outbreak is not feasible. The current focus should be on mitigation measures.”

Arcandor AG, that controls Thomas Cook, declined 3.7% to 1.80 euros and TUI AG dropped 2.5% to 29.42 euros. Euro Disney dropped 9% to 3.61 euros.

In trading autos, banks and steelmakers declined. Daimler lost nearly 4% after reporting its second quarterly loss and dragged BMW by 4.4%. Deutsche Bank fell 7% after it reported better than expected earnings but worries about the American banks lack of adequate capital lowered the sentiment in trading.

ThyssenKrupp and Salzgitter declined after steel prices dropped to another low. ArcelorMittal is bracing for a renegotiation of loan covenants as the company is likely to not meet earnings criteria.

Escada AG dropped 18% to 2.45 euros after its chief executive said that company may have to seek bankruptcy protection if restructuring plan fails.

Earnings Review

Daimler AG reported first quarter 2009 loss of 1.3 billion euros or 1.4 euros a share after losing 1.5 billion in the fourth quarter 2008 on sales decline of 22% to 18.7 billion euros. The company earned 1.3 billion euros or 1.29 euros a share in the quarter a year ago.

The second largest luxury automaker in Germany agreed to give up its 19.9% stake Chrysler LLC to Cerberus Capital Management LP and the company will book one time charge of $700 million.

Daimler declined 3% to 26.38 euros after the earnings release. Daimler stock peaked at 80 euros in late 2007.

Separately, Daimler agreed to cut 2 billion personnel cost with its workers council. Manufacturing workers will work for shorter work weeks at reduced pay and administrative and research workers will work 9% less for the same amount of wage cuts. In exchange for this cuts, the company agreed to protect all jobs till the end of June 2010.

The company release also noted, “Solely through the reduction of monthly remuneration, senior executives are waiving the equivalent of one monthly salary and members of the Board of Management are actually waiving the equivalent of two monthly salaries on an annual basis. Furthermore, the Supervisory Board will also decide soon on its own contribution.”

SGL SE declined 6.5% to 21.49 euros after the largest carbon and graphite products maker reported first quarter revenues declined 14% to 296 million euros net income declined to 81% to 8.7 million euros or 13 euro cents a share.

Air Liquid SA dropped 5.6% to 62.10 euros after it lowered its annual sales outlook to 2008 level and will cut costs by 300 million euros. The industrial gas company reported first quarter sales declined 3% to 3.09 billion euros.

Theolia SA plunged 12% to 2.88 euros after the French wind power company reported its annual loss increased to 244.1 million euros from 48.8 million euros a year ago. Revenues in the year plunged to 70 million euros from 306 million euros.

As of December 31, 2008, the group manages a total installed capacity of 671 megawatts, of which 360 MW for own account and 311 MW for third parties in Germany, France and Morocco.

Commodities and Miners Fall

Miners and commodities declined as investors take cautious views. Oil, gold and copper declined in London trading. Natural gas fell after LNG super tanker from Qatar is due to deliver its first shipment of cargo to meet the demand of utility companies.

Rio Tinto dropped 6% and Xstrata declined 6.1% to 563.50 pence. Anglo American declined 5.6% to 1,342 pence.

Banks Decline on Capital Adequacy Worries

Deutsche Bank AG ((DB)), Germany''s biggest bank reported first quarter revenues rose 57% to €7.2 billion from €4.6 billion a year ago. Net income in the quarter was €1.2 billion or €1.92 per diluted share compared to net loss of €141 million or €0.27 per share a year ago.

BNP Paribas SA dropped 3.9% to 36.77 euros, Credit Agricole SA lost 2.1% and Societe Generale SA declined 2.3%.

Banks declined after media speculation suggested that Bank of America and Citigroup are requested by the Fed to raise more capital. The officials at the banks are working with the regulators and disputing the need to raise capital according to the Wall Street Journal.

123jump.com first reported on Friday that 19 banks are severely undercapitalized and may need at least $850 billion if economy weakens in 2009 and 2010 and unemployment jumps to 12%.

European Gainers in Losers

Deutsche Bank dropped 5% to 40.45 euros and led decliners in DAX Index in Frankfurt trading followed by losses in BMW of 4%, in Thyssenkrupp AG of 3.9%, in Salzgitter AG of 3.9% and in Deutsche Boerse AG of 3%.

Beiersdorf AG led gainer in the DAX index with a rise of 4.5% followed by increase in Henkel AG of 1.2%, in Fresenius Medical of 1% and in K+S AG of 0.9%.

Europe Markets Review

In London FTSE 100 Index closed lower 70.61 or 1.69% to 4,096.40, in Paris CAC 40 Index decreased 51.41 or 1.66% to close at 3,051.02 and in Frankfurt DAX index lower 86.65 or 1.85% to close at 4,607.42. In Zurich trading SMI decreased 66.88 or 1.29% to close at 5,109.09.