European Markets Recover, Banks Struggle

123jump.com Staff
27 Nov, 2009
New York City

European markets closed higher and recovered from the earlier losses. Dubai loan losses and the worries that the debt reschedule may force rating revision of sovereign debt of Dubai, UAE. In trading, Volkswagen increased 6% on an upgrade and the company is targeting higher sales in Brazil.

[R]7:00 PM Frankfurt, Paris; 1:00 PM New York – European markets closed higher and recovered from the earlier losses. Dubai loan losses and the worries that the debt reschedule may force rating revision of sovereign debt of Dubai, UAE.[/R]

European markets rebounded after the initial losses on the worries related Dubai, UAE loan exposures. European banks are estimated to loan exposure of $60 billion of which $50 is with the UK banks.

In London FTSE 100 Index closed higher 51.60 or 0.99% to 5,245.73, in Paris CAC 40 Index increased 42.22 or 1.15% to close at 3,721.45, in Frankfurt DAX index higher 71.44 or 1.27% to close at 5,685.61. In Zurich trading SMI increased 53.28 or 0.85% to close at 6,336.66.

Dubai Exposure

Investors in Europe and Middle East were unnerved after Dubai World sought debt rescheduling for debt totaling at least $10 billion. The lack of loan details and the extent of exposure at different banks dragged banks lower in Europe and Middle East.

Royal Bank of Scotland said that French banks have loans $11.3 billion and German banks have loaned $10.2 billion. Swiss banks have loaned $4.3 billion and Italian banks have lent $1.9 billion to the emirates. The data reflect direct lending at the end of June and does not capture the bonds issued and securitized by banks.

According to the data available from Bank of International Settlements and Emirates Banks Association said that HSBC had the highest loan exposure to UAE that may be as high as $11 billion followed by Standard Chartered Bank with $7.8 billion.

While analysts are downplaying the fears of sovereign default, the lack of reliable data in the region are making investors jittery.

Thomson Reuters data suggest that syndicated loans that are still not repaid by Dubai stand at $45 billion of which $39 billion are issued to companies controlled by state or government owned companies.

Gainers & Losers

ArcelorMittal the steelmaker decreased 0.8% to €24.75.

Arcandor AG the troubled retailer rose 0.6% to €0.16.

Avenir Telecom SA the mobile-phone services operator surged 10.2% to €1.08.

BASF SE decreased 0.5% to €40.05.

Bouygues SA added 1.6% to €33.65 after the infrastructure company was upgraded to “equal-weight” from “underweight” at Morgan Stanley.

Cast SA the provider of quality-control software slipped 1.6% to €1.18.

Daimler AG fell 0.06% to €34.10.

Demag Cranes AG increased 1.7% to €22.93 after the maker of harbor cranes was upgraded to “buy” from “sell” at DZ Bank.

GK Software AG fell 2.6% to €37.50 after the supplier of software said that it is expecting growth in sales of 30% for the 2009 business year and profitability that matches the previous year 2008. Its sales in the first nine months of 2009 €13.16 million were up 21.2% from a year ago.

Indus Holding AG rose 0.5% to €12.00 after the industrial group confirmed its annual 2009 sales between €740 million and €750 million, while operating earnings should reach between €40 million and €50 million.

LEONI AG climbed 3.1% to €15.20 after the maker of automotive electrical cables was upgraded to “outperform” from “underperform” at CA Chevreux.

Metro AG the retailer dropped 0.2% to €42.18.

Porsche Automobil Holding SE advanced 1.4% to €47.25 after the maker of the 911 sports car was upgraded to “neutral” from “underperform” at BofA Merrill Lynch Global Research.

ProSiebenSat.1 Media AG the broadcasting company fell 1.1% to €8.36.

Siemens AG the electronics and electrical engineering closed unchanged at €64.88.

Total SA the oil refiner dropped 0.9% to €41.21.

Volkswagen AG added 2.1% to €82.77 after the automaker said Volkswagen do Brasil said Thursday it will invest 6.2 billion Brazilian reals ($3.5 billion) in Brazil between 2010 and 2014 to be the leader in the market.

DAX Index Movers

Beiersdorf AG led the decliners in the DAX index of 0.25%, followed by losses in Bayer AG of 0.23%, in Fresenius Medical Care AG & Co. KGaA of 0.11%.

Volkswagen AG led gainers in the DAX index with a rise of 7.13% followed by increase in Infineon Technologies AG of 3.87%, in BMW AG of 3.10%, in Deutsche Boerse AG of 2.61%, K+S AG of 2.52%.

CAC-40 Index Movers

Lagardere SCA led the decliners in the CAC-40 index of 0.60%, followed by losses in Sanofi-Aventis of 0.19%.

Alcatel Lucent gainers in the CAC-40 index with a rise of 4.98% followed by gainers in ArcelorMittal of 4.38%, in Michelin SCA of 3.48%, in Lafarge S.A. of 2.77%, in BNP Paribas SA of 2.40%.

FTSE 100 Index Movers

Of the stocks in the FTSE 100 index, 85 increased, 17 declined and none were unchanged.

Inmarsat Plc decliners in the FTSE 100 index with a loss of 2.76% followed by losses in Lloyds Banking Group Plc of 1.13%, in Fresnillo Plc of 1.11%, in United Utilities Group Plc of 1.07%, in Next Plc of 1.00%.

The Royal Bank of Scotland Group Plc led gainers in the FTSE 100 index with a rise of 5.05% followed by increase in Xstrata Plc of 4.99%, in Thomas Cook Group Plc of 4.79%, in Cairn Energy Plc of 3.92%, in Legal & General Group Plc of 3.57%.