European Indexes Drop 2%, Greece in Focus

Mayank Mehta
25 Feb, 2010
New York City

European markets fell sharply for the second day after rating agencies joined the chorus of investors urging Greece to meet its deficit target. Italy completed its

[R]7:00 PM Frankfurt, Paris; 1:00 PM New York – European markets fell sharply for the second day after rating agencies joined the chorus of investors urging Greece to meet its deficit target. Italy completed its €10 billion 10-year bond offering maturing in 2020. Valeo SA and France Telecom advanced on earnings.[/R]

European markets dropped for the second day in a row on the worries that Greece may need a bailout from Germany and France.

European Commission in its semi-annual forecast said that the region’s economic recovery is likely to be moderate and uneven as the governments unwind stimulus plans and domestic demand remains weak.

In London FTSE 100 Index closed lower 64.69 or 1.21% to 5,278.23, in Paris CAC 40 Index decreased 74.91 or 2.02% to close at 3,640.77, in Frankfurt DAX index lower 83.18 or 1.48% to close at 5,532.33. In Zurich trading SMI decreased 43.99 or 0.66% to close at 6,643.96.

German 10-year bond yields decreased 3 basis points to 3.1% and spreads to Greek bonds widened to 316 basis points. Spreads on Portuguese bonds increased to 117 basis points.

The ASE Index in Greece dropped 2.8% after Moody’s joined S&P and warned that it may lower the country’s debt rating if it fails to meet deficit goals.

Greece is schedule to complete its bond offering in the next five weeks to rollover the maturing debts.

Italy completed its €10 billion 10-year bond offering maturing in 2020. The offering of 4.25% yield securities was completed with a bid-to-cover ratio of 1.44.

Nokia Oyj declined 1.7% after Palm Inc said sales in the current year will be “well below” its previous estimate.

Gainers & Losers

Alcatel Lucent SA climbed 1.2% to €2.25 after the supplier of fixed-line phone networks was upgraded to “hold” from “sell” at UniCredit SpA.

Allianz SE an integrated financial service provider said fiscal 2009 revenues rose 5.2% to €97.4 billion from €92.6 billion a year ago. Net profit for the year was €4.30 billion or €9.50 per diluted share compared to net loss of €2.44 billion or €5.47 per share a year ago.

BASF SE gained 4.5% to €42.56 after the chemical company reported fourth quarter profit of $619 million and the company trimmed lower than expected dividend.

Credit Agricole SA rose 3.8% to €10.92 after the bank said fiscal 2009 net banking income rose 12% to €17.9 billion from €16 billion a year ago. Net profit for the year rose 10.8% to €1.13 billion compared to net profit of €1.02 billion a year ago.

Deutsche Telekom AG decreased 0.1% to €9.51 an integrated telecommunications provider said fiscal 2009 revenues rose 4.7% to €64.2 billion from €61.7 billion a year ago. Net profit for the year fell 57% to €873 million or €0.08 per ADS compared to net loss of €2.02 billion or €0.34 per ADS a year ago.

France Telecom S.A. rose 2.2% to €17.22 after the phone company said fiscal 2009 revenues fell 3.7% to €45.94 billion from €47.7 billion a year ago. Net profit for the year fell 26% to €3 billion or €1.13 per diluted share compared to net profit of €4.07 billion or €1.54 per share a year ago.

Natixis SA gained 3.0% to €3.74 an investment bank said fiscal 2009 net banking income fell 8% to €5.5 billion from €6 billion a year ago. Net loss for the fiscal 2009 was €1.7 billion compared to net loss of €2.8 billion a year ago.

Repsol YPF SA an integrated oil and gas company said fiscal 2009 net profit was €211 million or €0.17 per diluted share compared to net loss of €187 million or €0.15 per share a year ago.

Sky Deutschland AG fell 2.0% to €1.78 after the pay-television company posts fourth quarter loss of €114 million.

Suez Environnement SA fell 0.8% to €15.98 after the water company said fiscal 2009 revenues fell 0.8% to €12.3 billion from €12.4 billion a year ago. Net profit for the year fell 24% to €403 million compared to net profit of €533 million a year ago.

Valeo SA increased 7.0% to €22.11 an industrial company said fiscal 2009 revenues fell 14% to €7.5 billion from €8.7 billion a year ago. Net loss for the fiscal 2009 was €153 million compared to net loss of €207 million a year ago.

DAX Index Movers

Deutsche Post AG led the decliners in the DAX index of 3.52%, followed by losses in Siemens AG of 3.08%, in RWE AG of 3.01%, in E.ON AG of 2.94%, and in Infineon Technologies AG of 2.85%.

BASF SE led gainers in the DAX index with a rise of 1.02%.

CAC-40 Index Movers

Renault SA led the decliners in the CAC-40 index of 4.79%, followed by losses in AXA of 3.36%, in Compagnie de Saint-Gobain SA of 3.34%, in Technip of 3.23% and in Total SA of 3.23%.

France Telecom S.A. gainers in the CAC-40 index with a rise of 0.98%.