Date: Monday 28 May 2012
-Greek New Democracy party (pro-bail out) retakes lead in polls
-Spain to privatize between 20bn-30bn Euros in assets-Reports
-Santander asks for extra 3bn Euros to acquire Catalunya Banc-EC
-Spain will inject 30bn Euros in another 3 banks-El Mundo
Stoxx 600: 0.62%
Ibex 35: -1.05%
European equities are still trading higher at the midday mark, although with some exceptions, such as in Madrid, where events seem to have accelerated over the weekend as regards the restructuring and ‘cleaning-up’ of its financial system.
The main event in this regard is troubled lender Bankia’s petition to the government for €19bn in new shareholder’s equity. It is hoped by some that this will allow the Spanish Treasury to avoid having to tap markets for these additional funds (although it is expected to add to the country’s debt), while Bankia will be able to exchange that debt for fresh liquidity from the European Central Bank.
In parallel, there were reports over the weekend that Spain aims to privatize up to €30bn in assets, in a plan whose details are expected to be announced towards the summer. Additionally, Spanish daily El Mundo is reporting that the country will inject another €30bn into three other lenders, including Caixa Galicia and Catalunya Caixa.
“Although all of the above seem to be short or medium-term positives for the Spanish economy it is yet to be seen how quickly markets will return such a verdict, or not, and then there is the no small matter of the finances of the country’s different regions,” comment analysts at Digital Look. This last aspect of the Spanish debt crisis, which may have come to a head last Friday, when Catalonia petitioned Madrid for funding, is something which other observers have picked up on.
As an aside, there is some ‘market-chatter’ today as regards the possibility that Spain could tap European rescue funds should the country's risk premium hold at the currently elevated levels. This morning Spain’s risk premium over German bunds reached the 508 basis point mark.
Acting as a back-drop, the most recent voter polls put the Greek conservative pro-bail out party New Democracy ahead of Syriza. In fact, this is the reason behind the gains to be seen today in Europe. The poor results seen at today’s Italian debt auctions, however, seem to be capping the upside for stocks.
From a sector stand-point, and if one looks at the DJ Stoxx 600, the best performance is now being put in by: basic resources (2.57%), technology (1.77%) and industrial goods&services (0.62%).
Hochtief AG sees potential for billions of euros of revenue from joint projects with Spanish parent ACS, the German builder's finance chief told a German newspaper, according to Reuters.
According to aeronautics giant EADS’s chief executive, the company would have to rethink its ‘cost structure’ if the Eurozone collapsed and Europe returned to a system of national currencies.
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