Finance Markets

July 11, 2006

Eurofirst falls on profit reports concerns

Filed under: Equities, Economy, Europe

Weakness in the technology sector send the FTSE Eurofirst 300 0.9 percent lower on Tuesday, to close at 1,309.06. There were serious investor concerns as fears surfaced that quarterly reports could be disappointing.

French engineering group Alstom reported first-quarter sales figures that did not satisfy, while it warned that an increase in orders during the quarter will not be likely to be sustained all year. Shares in Alstom lost 3.5 percent to €66.95.

Among tech companies, Alcatel dropped 5.9 percent to €9.20 despite saying that preliminary quarterly numbers are about where they were expected to be and that its merger with Lucent Technologies would be closed by the end of the year. While Citigroup retained its “buy” recommendation for Alcatel, Dresdner Kleinwort retained a “sell” recommendation and a target share price of €8.60. Elsewhere, Nokia fell 2 percent to €15.14 and Ericsson declined by 3.4 percent to SKr22.60.

Phillips Electronics was down 3.8 percent to €23.06 ahead of its quarterly report, due next Monday.

ASML declined by 2 percent to €15.13 as the semiconductor sector saw losses. STMicroelectronics dropped 2.4 percent to €11.91, while Infineon was down by 2.8 percent to €8.73.

Among gainers on the day, drugmaker Roche ended the session 0.2 percent higher to SFr207.60, and went as high as SFr211, as UBS increased its target share price from SFr230 to SFr270, citing its potential for expansion.

Automobile manufacturer Fiat added 1.7 percent to €10.85 as Goldman Sachs issued a “buy” rating as it resumed coverage of the carmaker.

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July 10, 2006

Eurofirst up by 0.4 percent

Filed under: Equities, Economy, Europe

In Europe on Monday, the FTSE Eurofirst 300 added 0.4 percent to 1,321.04 as quarterly earnings reports began to be issued by European companies.

French property group Unibail added 1.7 percent to €135.10 ahead of its half-year earnings report, due later in the month. Merrill Lynch upgraded Unibail to “buy” based on the upward trend of office rents in Paris and issued a target share price of €150.

In the semiconductors sector, STMicroelectronics dropped 0.4 percent to €12.20 after a downgrade from “buy” to “neutral” and a decrease in its target share price from UBS. On the other hand, UBS reissued “buy” ratings for both ASML and Phillips Electronics. ASML added 0.5 percent to €15.44, while Phillips was up 1.1 percent to €23.96. Elsewhere, Infineon gained 1.7 percent to €8.98.

The oil sector saw declines as crude oil prices fell from record highs last week. OMV was down 1.8 percent to €47.71, while Statoil dropped 1.9 percent to NKr183.50.

In the pharmaceuticals sector, Roche added 0.6 percent to SFr207.20 after it said that it has filed with European regulators to gain approval for its drug Avastin for use against breast cancer. In addition, the way was cleared via a ruling from the International Trade Commission for Roche to apply for US approval for CERA, an experimental anemia drug.

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July 7, 2006

Eurofirst gains 0.2 percent over week

Filed under: Equities, Economy, Europe

European equities markets saw only small gains over the week as investors worried about what will happen concerning interest rates. The FTSE Eurofirst 300 dropped 0.2 percent on Friday but managed a 0.2 percent gain on the week to close at 1,316.45.

Some sectors did see gains on the week. Air carriers were helped out by a report from EasyJet that it had seen 15.6 percent more passenger traffic in June and predicted good profits growth for the year. Air France-KLM added 0.7 percent during the week to €18.51, while Ryanair was up 8.6 percent to €7.71, also on increased passenger traffic in June. Ryanair reported a 23 percent increase in passenger traffic over the same period last year.

The oil sector was up as well as crude oil prices reached new record highs during the week. Neste Oil was up 0.8 percent on the week to €27.75, while Norsk Hydro added 5.5 percent to NKr174 and Statoil advanced by 6 percent to NKr187.

Aerospace and defense group EADS added 3.2 percent on Friday after its new co-chief executive said that the company’s first priority was to regain investors’ confidence, but it still was down 3.5 percent to €21.7 after Rothschild questioned the valuation of Airbus. EADS owns 80 percent of Airbus.

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Bond yields fall on Friday; many remain up over week

Filed under: Bonds, Economy, US, Europe, UK, Japan

Yields on government bonds were down on Friday, but yields on several issues were higher for the week.

Bond prices in the United States benefited from new employment figures issued by the Department of Labor that showed 121,000 new jobs created in the US in June. This was up from the 92,000 new jobs that were created in May but much lower than the 200,000 new jobs that had been predicted for June in the wake of a private report issued Wednesday. That report, from payroll services company ADP had said that nearly 400,000 jobs had been created during the month. However, the hope that these numbers would help the US Federal Reserve to pause in its series of interest rate hikes was tempered by the report that wage inflation was up by its fastest rate since 2001.

In afternoon trade in New York, two-year Treasury bonds were down 3.4 basis points to a yield of 5.183 percent, still a gain of 2.1 basis points for the week. Meanwhile, ten-year bonds were 5.7 basis points lower to 5.128 percent, a drop of 1.7 percent during the week.

US news on employment also helped Eurozone bonds. The two-year Schatz dropped 3.3 basis points to 3.604 percent, still up 3 basis points on the week, while the ten-year Bund was down 6 basis points to yield 4.056 percent. The Bund remained up 0.2 basis points for the week.

In the UK, the two-year gilt dropped 4.7 basis points over the week to yield 4.171 percent, while the ten-year gilt was yielding 4.639 percent, a decline of 5.6 basis points during the week.

In Japan, the ten-year government bond was down on Friday as well, but at a yield of 1.960 percent was up 1 basis point on the week.

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July 6, 2006

Oil stocks take Eurofirst higher

Filed under: Equities, Economy, Europe

In Europe on Thursday, the FTSE Eurofirst 300 added 1 percent to 1,318.78 despite more comments from the president of the European Central Bank that point toward future hikes in interest rates in the region.

In the oil sector, stocks advanced even though crude oil prices stepped back from yesterday’s record highs. Neste Oil went as high as €27.90 during the day after Merrill Lynch raised the company’s target share price from €33 to €36. By the close, Neste had retreated to €27.57, still 3.3 percent higher. Meanwhile, Repsol YPF was up 1.9 percent to €22.56, while Statoil added 2.8 percent to NKr181 and OMV gained 3.6 percent to €48.70.

Automobile manufacturers saw some gains on the session. Peugeot was up 0.1 percent to €48.80 on the announcement that global sales were 0.6 percent higher in the first half of 2006. Renault added 2.8 percent to €83.55 even though its sales were weak in the first half of the year.

The airlines sector saw gains despite higher crude oil prices. Alitalia gained 1.1 percent to €0.91 after the an Italian government agency provisionally approved it’s purchase of rival Volare. Lufthansa was up 1.4 percent to €14.52, while Air France-KLM advanced by 1.5 percent to €18.51.

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July 5, 2006

Bond yields up on expected interest rate hikes

Filed under: Bonds, Economy, US, Europe, UK, Japan

Yields were up on government bonds on Wednesday as investors continued to expect interest rates to go up in a number of economies.

In the United States, a report that many more jobs than expected were created in June increased the expectation that the Fed will hike interest rates again in August. If Department of Labor Statistics numbers on Friday bear out today’s jobs numbers from the ADP, it could move analysts to rethink last week’s sentiment that the Fed might pause in its series of rate increases at its August meeting.

At mid-session in New York, the two-year Treasury bond had gained 7.1 basis points to a yield of 5.25 percent, while ten-year issues were yielding 5.235 percent, an increase of 8 basis points.

New data from the service sector in the Eurozone supported the consensus opinion that interest rates there will rise soon. Most analysts expect that when the European Central Bank meets on Thursday it will hold interest rates at their current level, but will signal that new rate hikes will come sooner rather than later.

The two-year Schatz was up 3.9 basis points to 3.603 percent, while the ten-year Bund added 3.1 basis points to a yield of 4.130 percent.

In the UK, meanwhile, the two-year gilt added 1.9 basis points to 4.775 percent, while the ten-year gilt was yielding 4.719 percent, a gain of 3.1 basis points.

Yields on Japanese government bonds were up as expectations grew that the Bank of Japan will end zero interest rates this month . Meanwhile, the furor over the Bank of Japan’s governor and his investment interests seemed to be abating. In addition, North Korea’s missile tests did not seem to have much of an impact on bonds activity.

The five-year Japanese government bond added 3.5 basis points to 1.560 percent, while the ten-year bond was up 0.5 basis points to a yield of 1.985 percent.

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July 4, 2006

European carmakers see declines

Filed under: Equities, Economy, Europe

Weakness in the automobile manufacturing sector hurt European stock markets on Tuesday, but strength in other sectors allowed the FTSE Eurofirst 300 to close 0.2 percent higher at 1,321.46.

The steel sector saw advances as ThyssenKrupp did the best among blue-chip stocks with a gain of 3.8 percent to €28.64 after it said it will buy back as much as 5 percent of its shares. West LB saw this as a sign that further consolidation in the sector will follow the Arcelor-Mittal merger.

Banks also did well amid mergers and acquisitions rumors. BBVA of Spain added 1.9 percent to €16.55 on talk that it could merge with HSBC. It was also helped by hopes that the results of the presidential election in Mexico, where it generates a substantial part of its earnings, could be beneficial to business. Elsewhere in the Spanish banking sector, Deutsche Bank issued positive comments about Banco Santander Central Hispano and Banco Pastor, sending their share values up 0.4 percent to €11.49 and 2.9 percent to €10.60 respectively.

Among carmakers, Volkswagen dropped 0.1 percent to €55.14 and Peugeot declined by 0.9 percent to €48.85. DaimlerChrysler fell 0.7 percent to €38.50 after new data showed that while its Mercedes Benz sales were up by 14 percent last month, sales by its US Chrysler unit were down 15 percent in the month. In addition, Morgan Stanley cut DaimlerChrysler’s target share price from €50 to €46.

Elsewhere in the sector, Fiat was down 1.8 percent to €10.349 on a downgrade from “neutral” to “sell” from Merrill Lynch. Renault was also 1.8 percent lower, to €82.70, after it said that it will explore the idea of an alliance with General Motors if GM proposes such a move.

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July 3, 2006

Eurofirst gains on banks, oil

Filed under: Equities, Economy, Europe

Gains in the oil and banking sectors helped European equities markets higher on Monday. The FTSE Eurofirst 300 added 0.4 percent to 1,318.95.

Carmaker Renault added 0.2 percent to €84.20 ahead of a board meeting set to discuss whether it will, along with Nissan, go into business with US automaker General Motors. At least one analyst said that such a partnership would make sense, but that it should be approached carefully considering the relatively weak position of GM at present.

The banking sector was mixed, but still helped out European markets as a whole. The National Bank of Greece dropped 4.1 percent to €29.62 on profit taking after a gain of almost 9 percent on Friday. Elsewhere, things were better. Banca Popolare Italiana added 6 percent to €7.77 after an Italian newspaper reported over the weekend that Societe Generale, Fortis, and Deutsche Bank had all approached Popolare with bids. Deutsche Bank gained 0.5 percent to €88.40, Societe Generale was up 0.9 percent to €116, and Fortis advanced by 1.6 percent to €27.10.

Among oil stocks, Cepsa gained 1.4 percent to €55.85, while Statoil added 1.7 percent to NKr179.50.

EADS dropped 0.8 percent to €22.28 after Rothschild valued the 20 percent of Airbus that BAE Systems owns at a lower figure than had been expected. BAE Systems also declined, by 3.3 percent. EADS also announced, over the weekend, that co-chief executive has resigned over the Airbus A380 delays and investigations into his financial dealings and that the head of Airbus, Gustav Humbert, was also stepping down.

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June 30, 2006

Eurofirst up 3 percent since January

Filed under: Equities, Economy, Europe

The FTSE Eurofirst 300 was up 2.4 percent this week to 1,313.62, for its best week since January, but it was down by 4.1 percent in the second quarter of 2006. The 300 has added 3 percent since the beginning of the year, but it will need to make up a lot of ground if it is to match its 2005 full-year gain of over 20 percent.

The steel sector saw gains on the week after Arcelor rejected a bid from Severstal, which was seen leaving room for an already-arranged merger with Mittal Steel. Arcelor added 7.8 percent during the week to €37.74. Elsewhere in the sector, ThyseenKrupp gained 3.8 percent to €26.77, while Salzgitter was up 6.9 percent to €66.37. Voestalpine advanced by 7.3 percent to €117.60.

European tiremakers saw declines after Japanese tiremaker Bridgestone of Japan cut its profits estimate for the year. Michelin was down 1.3 percent on the week to €47, while Continental fell 1.6 percent to €79.92.

Danish shipper AP Moller-Maersk declined by 5.2 percent to DKr45,400 on a reduced profits forecast for the year due to sub-par performance in its container shipping unit.

Bayer added 4.5 percent on Friday and 8.4 percent on the week to €35.94 after it said that it will sell part of its diagnostics unit to Siemens, which added 0.8 percent on the day Friday and 0.2 percent during the week to €68.03. Several banks either upgraded or reiterated their positive recommendations for Bayer during the week.

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June 28, 2006

Media, oil take Eurofirst higher

Filed under: Equities, Economy, Europe

European equities markets were up on Wednesday even though investors seemed determined to put off much activity until after the US Federal Reserve announces its decision on US interest rates. Its announcement will come after European markets close on Thursday.

The FTSE Eurofirst 300 added 0.2 percent to close the session at 1,272.25.

Oil stocks were up again as the price of crude oil continued to rise. Total gained 0.5 percent to €49.48, while Neste Oil was up 1.1 percent. Royal Dutch Shell A-shares listed in Amsterdam advanced by 1.5 percent to €25.61.

The media sector saw gains after the takeover saga involving US company Warner Music and the UK’s EMI stepped into the spotlight. Telecom Italia Media, which runs two broadcast television stations, digital channels, and a news agency, added 8.5 percent to €0.3718 after rumors escalated that publisher De Agostini might make a bid. However, Telecom Italia, down 1 percent to €2.118, which holds 69 percent of TI Media, and De Agostini both denied that there was a deal in the works. Elsewhere in the sector, Mediaset added 0.9 percent to €8.93. French broadcaster TF1 added 2.2 percent to €24.78, while its rival M6 gained 1.5 percent to €23.70.

After a decline of 9 percent on Tuesday, Danish shipper AP Möller-Maersk added 2.6 percent to DKr44.100 even though HSBC lowered its recommendation from “overweight” to “neutral” and lowered its target share price from DKr60.155 to DKr47.72.

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June 27, 2006

Shippers pull Eurofirst lower

Filed under: Equities, Economy, Europe

Continuing worries about interest rates around the world sent European equities markets lower on Tuesday. The FTSE Eurofirst 300 dropped 0.7 percent to 1,269.90.

The oil sector saw substantial gains, however, as crude oil prices began to rise again. Eni gained 2.1 percent to €22.53, while OMV added 3.7 percent to €44.40 and Statoil was up 4.8 percent to NKr175.

Utilities were down during the day. Suez was down 0.4 percent to €30.30 even though UBS raised its recommendation on the company from “neutral” to “buy”. Gaz de France, meanwhile, was 0.6 percent lower to €25.55. The French government has postponed the bill that would allow the merger between Suez and Gaz de France until September. Meanwhile Enel, the Italian utility, dropped by 1.1 percent to €6.575. Some analysts believe that Enel is considering a bid for Suez.

Shipper AP Möller-Maersk B shares were the biggest decliners of the day, falling 9.3 percent to DKr43,000 on a reduced profits forecast for 2006 on disappointing growth in its container shipping unit. German tourist and shipping group Tui dropped 3.6 percent to €14.96 despite maintaining its full-year predictions for its container division.

European tire manufacturers were down after Japanese tire maker Bridgestone cut its profits forecast for this year by 35 percent because the cost of raw materials has risen. Michelin declined by 2.6 percent to €45.82, while Continental fell 2.9 percent to €77.51.

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Ifo index shows German business confidence up

Filed under: Economy, Europe

The Ifo institute’s newly released business climate index shows that business sentiment in Germany is higher than it has been in 15 years. The index rose to 106.8 in June, up from a reading of 105.7 in May. In addition, separate confidence surveys looking at Italian and Dutch sentiment show increases in those nations as well. Business sentiment in France, however, was down in a survey released earlier this week.

The new measures of confidence in the Eurozone have lead some analysts to speculate that the European Central Bank might step up its increases in interest rates in the region. However, despite comments from some ECB officials that support this outlook, there have been no comments from the president of the ECB that would contradict his earlier remarks that indicated there would be no more rate hikes until the ECB meets at the end of August.

There was some speculation that the German confidence numbers might have been helped by the nation’s success so far in World Cup competition as well as by positive comments about the organization of the tournament, being held in Germany. In addition, some analysts have been hesitant to put too much importance on the Ifo survey in light of the reality that most of Germany’s economic growth has come on industrial exports, with continued weakness in German consumer spending. Standard & Poor’s warned that increasing interest rates could hit German consumers especially hard considering their relatively high debt load compared to consumers in other parts of the Eurozone.

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Government bond yields up in Europe, Japan

Filed under: Bonds, Economy, US, Europe, UK, Japan

Yields on US Treasury bonds were down on Tuesday as investors ignored healthy consumer sentiment and waited for the US Federal Reserve to make its decision on interest rates later this week. The gain in bond prices was strong enough to withstand dealer attempts to lower the price of two-year notes ahead of an auction of $22 billion in new issues scheduled for late in the day Tuesday. A sale of 5-year bonds was scheduled for Wednesday.

In late-morning trade in New York, two-year bonds had lost 2.1 basis points to 5.236 percent, while yields on ten-year bonds had dropped 3.3 basis points to 5.208 percent.

Eurozone bond yields were up as worries continued about the potential for the European Central Bank to raise interest rates again soon as comments by ECB officials tended to support that possibility. In addition, the Ifo index of German confidence was at 106.8 in June, the highest the index has been in 15 years, when it had been expected to fall from its revised May reading of 105.7.

Yields on the two-year Schatz were up by 3.3 percent in late afternoon trade, to 3.594 percent. The ten-year Bund gained 0.4 basis points to a yield of 4.090 percent.

Prices on UK gilts were up in late trade. The two-year gilt dropped 1.3 basis points to 4.834 percent, while the ten-year gilt was down by 0.1 basis point to yield 4.733 percent.

Amid increasing rumors that the governor of the Bank of Japan could resign, ten-year Japanese government bonds added 1 basis point to yield 1.910 percent.

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June 26, 2006

Eurofirst drops 0.3 percent to 1,278.91

Filed under: Equities, Economy, Europe

European equities markets were lower on Monday on fears that interest rates in the region could go up more than previously expected. The FTSE Eurofirst 300 dropped 0.3 percent to 1,278.91.

The banking sector was mixed on the day. Credit Agricole said that it would not raise its bid for Greek bank Emporiki even though the Bank of Cyprus was reported to have submitted a higher offer than Agricole’s. Agricole dropped 0.4 percent to €28.30 and Alpha Bank, also thought to be interested in bidding for Emporiki, was down 1.1 percent to €18.80. Meanwhile, Bank of Cyprus added 1.6 percent to €7.34. Emporiki remained even at €27.48.

Elsewhere among banks, Piraeus Bank gained 3.5 percent to €18.66 after it became known that it had increased its stake in Bank of Cyprus from 5.99 percent to 6.4 percent and rumors began to circulate that Piraeus was thinking about bidding for Bank of Cyprus. EFG Eurobank dropped 1.7 percent to €21.10, while National Bank of Greece ended down 1.8 percent to €28.08.

In the steel sector, Arcelor was up 7.9 percent to €37.80 and Mittal Steel dropped 3.7 percent to €24.38 after Arcelor agreed to a new offer from Mittal which was 43 percent higher than its January bid. The newly formed company will have to divest itself of some holdings to satisfy regulatory rules. Salzgitter, which is known to be interested in Arcelor’s European holdings, added 1.9 to €63.25. On the other hand, ThyssenKrupp dropped 2.6 percent to €25.13 on concerns that its deal with Mittal to purchase US company Dofasco could be abandoned due to opposition from Arcelor.

EADS added 3.3 percent to €22.75 after the French government conceded that the aerospace firm’s governance structure should be set by its industrial partners, DaimlerChrysler and Lagardere. The French had previously asked for more influence over the company after EADS said that deliveries of its new A380 super jumbo jet will be delayed.

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June 23, 2006

Bond yields up on interest rate concerns

Filed under: Bonds, Economy, US, Europe, UK, Japan

Yields on government bonds were up this week in the United States, the Eurozone, and in Japan. Investors’ main concerns revolved around the issue of interest rates.

In the United States, rumors began to circulate that the Federal Reserve will raise interest rates by 50 basis points rather than by the usual 25 basis points when it meets next week. Hard data was hard to come by, however, as officials of the Fed were observing a moratorium on comments that might provide hints about what they are planning to do. Some meat for speculation came when Barclays Capital said that it expects interest rates to be at 6 percent by the end of the year, rather than at the 5.5 percent currently expected by most analysts.

Yields on two-year treasury bonds were at 5.257 percent on Friday, a gain of 9 basis points over the week. Ten-year yields hit a four-year high at 5.218 percent, a gain of about 5 basis points.

In the Eurozone, the main talking point was speculation about when the European Central Bank will again raise interest rates. While the head of Bundesbank in Germany made comments implying that another rate hike was “warranted”, most analysts feel that such a move at the July meeting of the ECB is unlikely. The two-year Schatz gained 16 basis points on the week to 3.539 percent, while the ten-year Bund added 13 basis points to 4.074 percent.

Meanwhile, in the UK, ten-year gilts were up to a yield of 4.74 percent, a gain of 13 basis points.

In Japan, the ten-year government bond added 7 basis points during the week to a yield of 1.87 percent.

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June 22, 2006

Turkey rescinds withholding tax on foreign investors

Filed under: Economy, Europe

Turkey will discontinue a 15 percent withholding tax that was imposed on foreign investors in January. The change in policy brings the nation in line with European Union provisions on domicile and residence rules for the taxation of individuals, according to Turkey’s finance minister. The rule changes come at a time when the Istanbul equities market has dropped by more than 20 percent and the Turkish currency has lost around 20 percent of its value in a month.

Analysts in Turkey call the change “a step in the right direction” but doubt that it will halt the sell-offs that have sent the market and currency plunging. They say that only continued political stability and resolution of issues that are making negotiations toward Turkey’s entrance into the EU will stop the declines. While the finance minister said that the government is determined to enforce fiscal discipline and hold to an inflation target of 4 percent for the next two years, analysts said that more than that will be needed to restore investor confidence.

The rules changes will mean that income and dividends from financial instruments held by non-residents of Turkey will not have any tax withheld from them. Residents of Turkey will see their withholding go from 15 percent to 10 percent on income and dividends, but will still have 15 percent withheld from deposits and repos. The tax exemption for derivative instruments will remain in place.

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June 21, 2006

Eurofirst makes fractional gain

Filed under: Equities, Economy, Europe

The FTSE Eurofirst 300 was up on Wednesday, but by only 0.3 points to 1,276.47 after being in negative territory for most of the session.

The banking sector was mixed. Deutsche Bank added 0.6 percent to €84.61 when it said that it had prevailed in a bidding war for Berliner Bank and will buy it for €681 billion. The Bank of Cyprus lost 7.6 percent to €3.99 when it announced that it will enter the bidding war for Greek bank Emporiki. The loss came as investors wondered how Bank of Cyprus will fund its offer, which must exceed Credit Agricole’s all cash bid of €3.1 billion. Emporiki dropped 0.4 percent to €27.20. Alpha Bank, also said to be thinking about bidding for Emporiki, lost 3.5 percent to €19.24. Meanwhile, the National Bank of Greece was down 3.9 percent to €27.10 on the aftereffects of a €3 billion cash call to fund its purchase of Finansbank of Turkey.

Aerospace group EADS was down 2.5 percent on the day to €20.92 when the prime minister of France said that the state wishes to exert more control over the company in the wake of announced delays in delivery of its new A380 superjumbo jet.

The automobile manufacturing sector saw losses over the day after declines by US companies Ford and General Motors. Peugeot fell 2.3 percent to €48.25 on comments from Oddo Securities that the carmaker could miss its first-half target for an operating profit margin of 2.8 percent. Volkswagen and Renault also saw declines, as VW lost 1.9 percent to €52.68 and Renault dropped 1.2 percent to €84.65.

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Bond yields down in US, UK

Filed under: Bonds, Economy, US, Europe, UK

Officials of the US Federal Reserve have stopped making public comments, a customary practice ahead of rate-setting meetings, leaving government bond purchasers without much data on which to base decisions as data from other sources is also lacking at present. With summer beginning, a time of traditionally limited trade, volumes were low in the US Treasury market.

At mid-session in New York, two-year Treasury bonds were yielding 5.203 percent, unchanged from Tuesday’s levels. Meanwhile, ten-year bonds had dropped 0.4 basis points to a yield of 5.153 percent.

In the UK, release of the minutes from the Bank of England’s most recent rate-setting meeting showed that only one member had voted to raise rates. However, the rally caused by the news was limited as speculation continued that rates would rise soon after housing market data was stronger than had been expected.

Yields on two-year gilts dropped 1.9 basis points to 4.817 percent, while ten-year yields were down by only 0.1 basis point to 4.718 percent.

Eurozone yields were up after remarks from the governor of the European Central Bank that interest rates there will be going up again in the effort to control inflation. The comments came in the wake of new data from France that showed household goods purchase there have risen at their fastest rate in 20 years.

The two-year Schatz added 1.4 basis points to yield 3.470 percent, while the ten-year Bund yielded 4.008 percent, a rise of 1.1 basis point.

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June 20, 2006

Interest rates up in Sweden

Filed under: Economy, Europe

The Swedish central bank has predicted that that the economy in Sweden will grow by 3.7 percent in 2006 and that consumer price inflation would reach 1.5 percent. The Swedish economy has been experiencing strong growth in both domestic and exports sectors. In consequence of these forecasts, the Riksbank raised interest rates by 25 basis points on Tuesday to 2.25 percent. In the statement that came with news of the raise, the Bank indicated that further hikes in interest rates would likely come in similar increments at their August, October, and December meetings.

If these indications turn out to be accurate interest rates in Sweden could be at 3 percent by the end of 2006. The comments also implied that rates could rise as high as 3.5 percent next year. The Bank is determined to keep inflation within 1 percent of its stated target of 2 percent for the next “couple of years”.

Analysts said that the Bank was concerned about higher household debt and rising prices for homes. It its statement, the Bank acknowledged these concerns, but said that inflation is being moderated by smaller rises in the price of imported items. The Bank’s statement on these issues takes on more importance in light of national elections that are scheduled for September, especially since polls show that the nation’s voters are currently evenly split between support for the current government and its conservative opponents.

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June 19, 2006

Eurofirst 300 gains on telecoms

Filed under: Equities, Economy, Europe

The FTSE Eurofirst 300 gained 0.7 percent on Monday to close at 1,269.21, helped by an announced merger in the telecommunications sector.

Nokia of Finland said it would merge its network equipment unit with that of Siemens. The announcement sent shares in Nokia up by 3.2 percent to €16.15, while Siemens added 7.2 percent to €67.36. The merger was expected to save €1.5 billion per year by 2010. While Dresdner Kleinwort Wasserstein made negative comments about the deal, including that the deal would take a long time to close, HSBC upgraded Siemens from “neutral” to “overweight” and increased the German telecom’s target share price from €76 to €81.

Also in telecoms, TeliaSonera dropped 1.8 percent to SKr39 on a downgrade from “hold” to “sell” from Citigroup.

In semiconductors, Infineon was 0.7 percent higher at €8.57, while STMicroelectronics gained 1.9 percent to €12.49 on a buy recommendation from Morgan Stanley.

Ferrovial added 4.2 percent to €55.45 on an upgrade from “hold” to “buy” from Societe Generale, based on the assumption that the Spanish construction group will complete its takeover of airport operator BAA.

In the insurance sector, Allianz was up 3.5 percent to €118.48, while RAS gained 2.9 percent to €18.57 and Axa advanced by 1.3 percent to €24.30.

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