Finance Markets

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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Scant news sends bond yields higher

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

Yields on government bonds were up in global economies on Monday as a lack of substantive economic news caused investors to be cautious about their activities in the current climate of higher interest rates.

With August Fed futures indicating a 75 percent probability that the US Federal Reserve will raise interest rates again on August 8 and a near-certainty that rates will be raised this month as well, yields on US Treasury bonds were up. Ten-year issues added 1.8 basis points to a yield of 5.153 percent, while both two-year and thirty-year bonds were yielding 5.194 percent. Two-year paper was up 2.6 basis points, while thirty-year bonds gained 2.1 basis points.

Comments from a European Central Bank official that hinted at another rate hike soon in the Eurozone and a stronger equities market both sent bond yields higher in the region. The two-year Schatz added 4.6 basis points to 3.421 percent, while the ten-year Bund was yielding 3.971 percent, a gain of 2.2 basis points.

A stronger equities market and the lack of economic news in the UK also sent gilt yields higher, as did anticipation of Wednesday’s release of the minutes of the most recent meeting of the Bank of England’s monetary policy committee. Two-year gilts added 1.8 basis points to 4.787 percent and ten-year gilts gained 5.4 basis pints to a yield of 4.665 percent.

In Japan, the 10-year government bond gained 2 basis points to yield 1.825 percent. There is speculation that interest rates will rise above zero when the Bank of Japan meets in July, since equities markets in Japan seem to have stabilized after recent declines.

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June 16, 2006

Eurofirst down on day, week

Filed under: Equities, Economy, Europe

The FTSE Eurofirst 300 was down for the day on Friday as well as lower for the week as a whole. The 300 lost 0.6 percent on the day to 1,260.8, a loss of 1.2 percent during the week as investors seemed to ignore positive economic data.

In the telecommunications sector, Telefonica declined by 1.6 percent to €12.79, while TeliaSonera dropped 10.9 percent to SKr40.00 after it made public plans to enter the Spanish mobile phone market.

Aircraft manufacturer EADS lost 24.7 percent to €20.00 after it said it would lose €2 billion in profits in the next four years due to delays in delivery of the new Airbus A380 superjumbo jet. Further hurting the company, some executives had to admit mistakes in selling shares just weeks before the delays were made known to the public.

In the banking sector, Credit Agricole added 0.1 percent to €28.02 after offering for Greek bank Emporiki, which added 12.2 percent to €26.30 on news of the bid.

Pharmaceuticals were mixed. Bayer added 0.6 percent to €33.31 after it triumphed over Merck in a bidding battle for Schering and received an upgrade from “hold” to “add” from WestLB. Merck dropped 0.2 percent to €73.80, while Schering was up 3.4 percent to €89.14.

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June 15, 2006

Bond yields up on interest rate expectations

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

Yields on government bonds were up in most major markets on Thursday as the likelihood increased that the US Federal Reserve would raise interest rates later in the month. In addition to a hike this month, analysts are increasingly convinced that there will also be a rate hike at the Fed’s August meeting.

At mid-day in New York, two-year Treasury bonds added 2.6 basis points to 5.146 percent, nearly a five-year high, while yields on ten-year notes were up 3 basis points to 5.100 percent.

In the Eurozone, inflation concerns affected bond yields. The two-year Schatz was yielding 3.392 percent late in the trading day, a gain of 3.7 basis points. Meanwhile, the ten-year Bund was 4.4 basis points higher to a yield of 3.948 percent.

UK gilts saw yields rise, as well. Two-year yields were up 4.2 basis points to 4.733 percent, while the yield on ten-year gilds were at 4.622 percent, a rise of 8.9 basis points. New data showed that retail sales there is up more than had been expected and prices on new houses are rising faster than they have in two years.

In Japan, yields on the ten-year government bond stood firm at 1.770 percent as there was essentially no reaction to the Bank of Japan’s expected decision to keep interest rates at zero for the time being.

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Eurofirst gains 2.3 percent

Filed under: Equities, Economy, Europe

European equities markets saw gains on Thursday as many of the stocks that have seen the biggest losses have turned around to see substantial gains. The FTSE Eurofirst 300 added 2.3 percent on the day to 1,268.44.

Automobile manufacturers were up on the day after new data on car registrations in Europe was released. BMW added 3.3 percent to €37.75, while Fiat was up 4.9 percent to €10.234 and Volkswagen gained 5.1 percent to €53.36.

Higher prices on crude oil and metals helped companies that deal in those commodities to gains. Norsk Hydro, with activities in both oil and aluminium, was up 9.3 percent to NKr164. Statoil advanced by 6.2 percent to NKr164.

Banks were up as well. National Bank of Greece added 9.5 percent to €29.02; it had dropped almost 10 percent since the first of June. Meanwhile, Commerzbank gained 4.4 percent to €26.92 as Deutsche Bank upgraded it to “buy” and said that its significant loss in share price recently was more than could be justified.

Utilities were mixed. Gaz de France and Suez, which have been planning a merger, each added 1 percent, to €26.17 and €29.97 respectively. Deutsche Bank commented that political support for the deal has receded in France and consequently it would likely not happen. Italian utility Enel, which has bid for Suez, declined by 0.1 percent to €6.993.

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June 14, 2006

EADS drops 26.3 percetn on Airbus delivery woes

Filed under: Equities, Economy, Europe

European equities did a bit better on Wednesday, despite new data on prices out of the US that only served to heighten worries that inflation is getting out of hand. The FTSE Eurofirst 300 was up 0.1 percent by the end of the trading day to 1,240.15.

Banking and finance was mixed on mergers and acquisitions issues. After Credit Suisse said that it would sell its Winterthur insurance business to French insurer Axa, Credit Suisse gained 1.4 percent to SFr63.70 but Axa dropped 1.8 percent to €23.87. Meanwhile, Greek bank Emporiki added 1.8 percent to €25.24 as investors hoped for another bid after Greece’s finance minister made the comment that it should not be too quick to accept Credit Agricole’s bid. Agricole, meanwhile, was up 2.1 percent to €27.33.

The pharmaceuticals sector also saw maneuvering around bids issues. Bayer added 6.9 percent to €32.66 when competitor Merck took itself out of the bidding for German healthcare group Schering. Schering gained 2.1 percent to €89.00, while Merck was up 6 percent to €72.58 as investors anticipated a possible special dividend.

On the negative side of the ledger, airplane manufacturer EADS lost 26.3 percent to €18.73 after announcing that delays in deliveries of the Airbus A380 superjumbo jet would cost it €2 billion next year and that in view of the delays, it would allow buyers to walk away from orders they had already placed. In consequence, Deutsche Bank issued a downgrade on EADS from “buy” to “hold” and revised its target share price downward from €33 to €26. WestLB, on the other hand, upgraded the aircraft maker to “buy”.

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June 13, 2006

Eurofirst 3 percent lower than at year’s start

Filed under: Equities, Economy, Europe

European equities markets were down on Tuesday as investors continued to worry about the possibility of more hikes in interest rates and how such increases would impact global economic growth. The Eurofirst 300 was down 2.1 percent to 1,238,73. It has dropped 11.9 percent since it reached its peak for the year on May 9, and is nearly 3 percent lower than it was at the beginning of 2006. Contributing to the declines were losses in the oil and steel sectors.

In the steel sector, ThyssenKrupp was down 3.5 percent to €23.26, while Salzgitter dropped 5.9 percent to €55.75 and Rautaruukki fell 7.6 percent to €19.43. In the oil sector, Norsk Hydro was down 5.6 percent to NKr144.

Stock exchange operators were also down on the day. Deutsche Borse fell 5.3 percent to €94.41 after a report that it was getting ready to add to the cash portion of its offer for Euronext. Euronext, meanwhile, declined by 7.9 percent to €63.90 after shares in the New York Stock Exchange dropped for two straight sessions, sending the value of its offer in cash and shares for Euronext lower.

Among banks, Credit Agricole was down 3.2 percent to €26.77 after it made a bid for Greek bank Emporiki, which added 5.8 percent on the announcement of the offer. Elsewhere, Austrian bank Raiffeisen International declined by 5.7 percent to €58.10.

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June 12, 2006

Bond yields up in US, Japan

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

Government bond yields were up in the US and in Japan on Monday, but fell in the Eurozone and in the UK.

In the United States, yields on two-year and ten-year Treasury notes continued the inversion that began last week, signaling that investors are worried that more interest rate hikes, now widely expected, will hurt economic growth and possibly even send the US economy into a recession. By late morning in New York, two-year Treasuries had added 1.3 basis points to a yield of 5.018 percent, while ten-year notes were up 1 basis point to 4.989 percent.

Japanese government bonds saw yields climb on news that economic growth there in the first quarter had been revised significantly higher. This heightened expectations that the Bank of Japan will abandon its zero interest rate policy during meetings this week. All of this sent yields on the ten-year government bond to 1.865 percent, 1.5 basis points higher.

Trade in government bonds was light in the Eurozone as investors waited for the release of new consumer price inflation data, ,due on Thursday. The buying that did take place was largely due to investors seeking safe places for their money as European equity markets saw declines. The two-year Schatz yielded 3.323 percent, a decline of 2.4 basis points, while the ten-year Bund dropped 1.8 basis points to 3.911 percent..

Yields dropped in the UK as well in answer to mixed data on producer prices and in anticipation of new consumer price data to be delivered on Thursday. The two-year gilt was down 1.3 basis points to 4.644 percent and the ten-year gilt yielded 4.536 percent, a decline of 3.1 basis points.

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June 9, 2006

End of week rally boosts Eurofirst - but not enough

Filed under: Equities, Economy, Europe

The FTSE Eurofirst 300 ended the week with a gain of 1.7 percent, to 1,276.32, but over the week it dropped 2.8 percent. Miners, oil companies, and other sectors connected to resources were responsible for much of the declines on the week.

The pharmaceuticals sector was mixed. Irish drugmaker Elan lost almost 17 percent during the week to €12.38 after the US Food and Drug Administration allowed them to return their multiple sclerosis drug Tysabri to the shelves, but only as a treatment of last resort after its sales were stopped earlier due to the deaths of some patients taking the drug. With the reintroduction, Elan said that it would increase the price of the drug. Drug companies with rival MS treatments saw gains, however. Schering added 1 percent to €86.25, while Serono was up 3.8 percent to SFr802. Also gaining during the week was Roche, which was up 1.5 percent to SFr194.20 after it announced encouraging test results on three different cancer drugs.

Telecommunications companies were mixed as well. Telecom Italia gained 0.9 percent to €2.24, Belgacom added 1 percent to €25.90, and Telefonica advanced by 1.4 percent to €13. But France Telecom declined by 2.3 percent to €17.29 after it said it would sell its 54 percent share of directory publisher PagesJaunes, which was up 2.5 percent this week to €22.89.

In oil related sectors, Austrian oil prodcuer OMV dropped 15.6 percent during the week to €39.75. Atlas Copco, the Swedish engineering company that works with oil producers, added 4.4 percent to SKr165.50 on Friday, but still declined by 10 percent over the week.

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June 8, 2006

Eurofirst closes down 2.4 percent

Filed under: Equities, Economy, Europe

The European equities markets saw steep declines on Thursday on sell-offs. They were not alone, as Asian markets and the markets in London also fell substantially. The FTSE Eurofirst 300 dropped by 2.4 percent on the day, to close at 1,257.6. It was the fifth session in the past month in which the Eurofirst declined by more than 2 percent in a day. Elsewhere, the Xetra Dax and the CAC 40 each lost 2.9 percent by the close of the trading day.

Utilities were mixed, with Suez up 0.2 percent to €30.20 but down from where it had been earlier in the session. Gaz de France was 0.9 percent lower, however, to close at €26.19, while Enel dropped 0.5 percent to €7.09.

The oil sector saw significant declines as crude oil prices dropped below the $70 per barrel level. OMV lost 8.1 percent to SKr174, while Norsk Hydro declined by 7.9 percent to NKr152.50 and Neste Oil was down 6.8 percent to €23.73.

Automobile manufacturers were also down on the day. BMW lost early gains on the news that sales had risen by 5.5 percent in May to close 0.7 percent lower to €37.50. Elsewhere in the sector, Volkswagen dropped 0.9 percent to €51.43, Renault was down 1.5 percent to €84.20, and DaimlerChrysler fell 2.3 percent on the day.

Airlines were mixed. Air France dropped 2.4 percent to €15.96, while Lufthansa was down 0.7 percent to €13.60. On the other hand, Ryanair added 3.5 percent to €6.87 on its full-year report and on the drop in crude oil prices.

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ECB raises interest rates; BofE holds rates firm

Filed under: Economy, Europe, UK

As expected, the European Central Bank raised interest rates in the Eurozone on Thursday. The rate rise was by 25 basis points ti 2.75 percent. Some analysts had speculated earlier in the week that it would hike rates by 50 basis points, but sentiment had turned to an expectation of the smaller rise in rates as the Bank’s meeting drew nearer.

Data contributing to the decision to raise rates included consumer price inflation that was up 2.5 percent in May, above the ECB’s target of below 2 percent. Consumer price inflation had been up by 2.4 percent in May and by 2.2 percent in March. In addition, producer price inflation was up to 5.4 percent in April, with core inflation up by 2.2 percent.

The circumstances that kept the Bank from issuing a 50 bp increase included fears that the recovery in the Eurozone’s economy could be too dependent on growth in export-focused sectors and that domestic growth could stall if money is tightened too much or too quickly. In addition, a 50 bp hike could have strengthened the euro, which would have sent the dollar-cost of exports up. Also, the International Monetary Fund said that the region’s economy could not support too high a rate hike.

Meanwhile, in the UK, the Bank of England voted for the tenth consecutive month to hold interest rates at the current level of 4.5 percent. This decision, too, was expected. Factors playing into the Bank’s decision included April manufacturing output measured at only 0.5 percent higher than it had been a year ago. Industrial output was in worse shape, dropping 1 percent in April over output in the same month last year. In addition, new data shows that the industrial sector in the UK has underperformed the US by 16 percent and Germany by 11 percent since 2002.

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June 7, 2006

Xetra Dax listing rules eased

Filed under: Equities, Economy, Europe

In Europe on Wednesday the equities markets saw advances, with the FTSE Eurofirst 300 up 0.7 percent to 1,289.1 and Germany’s Xetra Dax adding 0.8 percent to 5,543.93. The Dax was helped by an announcement by Deutsche Borse that it will make it easier for companies to list on the Dax. The change means that that companies will not need to be registered in Germany to list there, but only must be headquartered there.

European aerospace company EADS has said it would pursue a listing on the Dax, sending its shares up 4.1 percent to €26.75. EADS has headquarters in both Paris and Munich.

Utilities were up on the day, largely on mergers and acquisitions issues. In the utilities sector, Suez, working on a merger with Gaz de France, was up 3.3 percent to €30.15 after Enel of Italy said that it was still interested in pursuing a deal with Suez. Enel gained 0.9 percent to €7.12, while Gaz de France added 0.2 percent to €26.43.

Endsea, the Spanish electrical group, was up 2 percent to €26.20 after Credit Suisse raised its target share price from €28.50 to €29.50. Gas Natural, a Spanish rival, and Eon of German are currently in a bidding battle over Endsea.

In the telecommunications sector, France Telecom said it will sell its 54 percent share in PagesJaunes, a directory publisher. The sale will raise up to €3.4 billion for FT, which is rumored to be in talks, joined by private equity group Carlyle, to purchase Austrian mobile company One. Other rumors have FT interested in purchasing a stake in Belgium’s Mobistar. All the talk sent PagesJaunes 1.1 percent higher to €22.77, while France Telecom added 2.3 percent to €17.60.

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June 6, 2006

European markets decline

Filed under: Equities, Economy, Europe

In Europe on Tuesday, equities markets were down on a day when every single sector saw declines in a general sell-off as investors acted on concerns over what they feared might happen to interest rates worldwide. The FTSE Eurofirst 300 declined by 1.9 percent on the day to 1,280.55. In Germany and in France the Xetra Dax and the CAC had each lost over 2 percent by the close.

Ferrovial of Spain was down 4.7 percent to €57.95 on the news that British airports operator had accepted their offer rather than a higher bid from a group led by investment bank Goldman Sachs. The decline came as some analysts expressed the belief that Ferrovial has taken on more than it can handle with the offer. Meanwhile, BAA’s London-listed shares closed below Ferrovial’s bid of 950.25 per share.

Still in aviation-related shares, discount airline Ryanair dropped 1.2 percent to €6.80 despite a full-year earnings report that was a bit better than had been expected. Dresdner Kleinwort Wasserstein reiterated its “buy” recommendation on the air carrier.

European automobile manufacturers saw substantial declines. DaimlerChrysler was down 4.2 percent to €38.33 after Credit Suisse lowered its target share price for the carmaker from €46 to €44. Elsewhere in the sector, Porsche lost 3.4 percent to €748.87, while Fiat dropped 3.3 percent to €10.08 and BMW was 3 percent lower at €37.88.

In the pharmaceutical sector, Irish drug maker Elan lost 16.3 percent to €12.35 after its drug Tysabri, a treatment for multiple sclerosis drug was approved by the US Food and Drug Administration only for use in patients who have not responded to other treatments. Tysabri was taken off the market last year after some patients being treated with the drug experienced fatal side effects. Serono, the Swiss drug maker, added 1.3 percent on the day to SFr796 on a Bear Stearns comment that it did not see the FDA ruling in Elan’s favor as a threat to Serono’s MS drug, Rebif.

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June 2, 2006

European telecoms higher this week

Filed under: Equities, Economy, Europe

While the FTSE Eurofirst 300 gained 0.2 percent on Friday to close at 1,313.20, it dropped 0.7 percent on the week thanks at least in part of a sell-off on Tuesday that was prompted by worries about the effects of an expected rise in Eurozone interest rates. Despite the down week for the equities markets as a whole, the telecommunications sector and stock exchange operators had positive a positive week.

The announcement on Friday by the New York Stock Exchange that it has agreed to purchase Euronext for €7.78 billion put an apparent end to the effort by Deutsche Borse to merge with the pan-European exchange. The announcement sent shares in Deutsche Borse down by 1.2 percent on the day, but the German exchange still ended the week up by 1.4 percent at €105.30. Euronext added 3.3 percent on the day and 2.7 percent for the full week, closing on Friday at €71.15.

In the telecommunications sector, Telefonica added 1.3 percent when Nomura reconfirmed its “buy” rating on the company and raised its fair value estimate to €15.30 from €14.50. Telecom Italia was up 2.6 percent on the week to €2.2270. Dresdner Kleinwort Wasserstein, disagreed with Nomura, recommending that its clients drop Telefonica in favor of Telecom Italia.

Elsewhere in the sector, France Telecom advanced by 3.5 percent during the week to €17.69, while Portugal Telecom was up 3.6 percent on the day and on the week to trade at €9.62 on rumors of possible bids. Telnor was up 6.7 percent on the week to NKr79.00.

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Government bond yields fall in largest global markets

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

Yields on US Treasury bonds were down Friday after the release of new data on employment cut the chances that the Federal Reserve will raise interest rates at their June meeting. Only 75,000 non-farms jobs were created in May, many fewer than the 170,000 jobs analysts expected would be created. In addition, the number of jobs created in March and April were revised downward. Even so, the unemployment rate declined to 4.6 percent in May, from 4.7 percent in April. While the general rule is that 150,000 jobs must be created each month to employ new workers entering the labor market, the unemployment rate is figured independently from job creation numbers.

After the new data was released, yields on ten-year Treasury notes dropped 5 basis points to 5.054 percent, while two-year bonds were yielding 4.975 percent, a decline of 5.4 basis points.

Activity in the US bond markets sent yields on Eurozone bonds down as well. The two-year Schatz dropped 2.3 basis points to 3.362 percent, while the ten-year Bund lost 1.5 basis points to 3.976 percent. UK gilts, meanwhile, were less active. Two-year yields were unchanged at 4.720 percent, while the yields on ten-year gilts dropped 1.2 basis points to a yield of 4.621 percent.

In Japan, ten-year government bonds were down 4 basis points to a yield of 1.905 percent. The drop in yields came after a large rise on Thursday as investors looked for bargains.

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