The week started with a sharp drop in share price of air-sector and tour operators. Reason is the continuing chaos in European airspace despite the stated willingness of some airports to start work. Shares in German airline Lufthansa sink by nearly 5.5 per cent in early session today in Frankfurt. The main DAX index does move with a fall of 0.4 per cent to 6 157 points. Shares of Easy Jet lost 3.7 percent of its value and those of Ryanair retreated by 3 per cent. The market capitalization of British Airways does sank 6 percent. Against this background, Britain’s FTSE 100 index lost 0.2 per cent. Among the victims is now the French airline Air France-KLM, and as the shares dropped by 8.3 per cent purposes only minutes after the start of the exchange session. About this time the French CAC 40 index lost 0.6 per cent. One of the few companies that issued its forecast for losses from air-crisis is tour-operator TUI Travel. Calculations show that when the company lost around 20 million pounds (30.6 million dollars). Estimates are that each day during which the crisis continues, the more it will cost about 5-6 million pounds.
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The World financial leaders will negotiate this week on how to give more voting rights in the World Bank to developing economies such as China. The talks are a prelude to a crucial battle for the International Monetary Fund, writes Reuters. World Bank President Robert Zoellick said in an interview with the agency that has plans for a capital increase of the international financial institution with 3.5 billion dollars, which will be the first of more than 20 years. The funds will come from rich countries and developing countries like China. This will help the World Bank to restore its capacity after large loans granted during the standoff. Discuss and question the change of the voting rights in the bank, which will generate additional $ 1 billion in fresh capital, which is quite a complex political issue because it means some countries, particularly in Europe, partly to give up rights their vote. Britain, one of the biggest sponsors in the bank, probably will not take a position before leaving the results of parliamentary elections on 6 May. Scandinavian countries, which are usually generous in terms of aid to developing countries are now reluctant to give up their voting rights. At its meeting in Pittsburgh last year by leaders of the G-20 agreed to transfer 3% of total voting rights at the World Bank and at least 5 percent in the International Monetary Fund.
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Friday’s trading session began with the U.S. increased for all three major indexes, after investor confidence that the economy will continue to recover, took precedence over concerns about Debt Crisis in Greece. On Monday begins a new season in the U.S. corporate financial results with the aluminum producer Alcoa for the first quarter of this year. The only economic data out today showed that stocks of finished goods to wholesalers in the U.S. rose more than expected in February to 0.6 percent on a monthly basis. Their increase in January amounted to 0.1 per cent. The increase in stocks of finished goods is a sign to reduce business costs in the future because chains wholesale are more likely to buy new goods when their stocks are exhausted. Index Dow Jones Industrial Average, which unites 30 largest stock companies and liquidity in the U.S. increased by 0.3% to 10 958.13 points an hour after the start of the session. Since the beginning of the week he was on the verge of psychological level of 11 thousand points, but unable to move. The broader S & P 500 added 0.2 percent to 1 189.06 points, supported mainly by energy companies and consumer sectors. Meanwhile, the main stock index, Nasdaq – Nasdaq Composite, also rose 0.2% to 2 439.71 points. Yesterday’s volatile session brought mild increases in the indexes after the best sales figures of some of the largest chains of retail in the U.S. in March. They managed to offset the news of the increase in new applications for unemployment benefits last week.
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The sales of high-risk corporate bonds worldwide, known as “junk bonds”, set a new record this month because of record low interest rates and the large amount of money in circulation. This, together with better prospects for the global economy, encourages investment, even in companies with low credit rating. Companies worldwide have issued bonds for risk 38.3 billion dollars in March, more than the previous record of November 2006, where such securities are issued for 36 billion dollars. Risk premium on these “junk bonds” have since declined by 0.95 percentage points to 5.96 percent. This shows the difference between their yield and that of U.S. government bonds. According Index Bank of America Merrill Lynch, which monitors the risk premium on these bonds is the smallest spread since the beginning of 2008, which indicates that the situation on financial markets worldwide has normalized. Over the past quarter investors have invested 33.6 billion dollars in funds that invest in risky securities, a study of EPFR Global. The trend in March is radically different from what happened in February, when many companies were forced to postpone planned bond issues because of the high risk premiums. Fiscal crisis in Greece led many investors to retreat from risky assets due to concerns of re-rolling of the global economy and the freezing of financial markets this year.
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The yield on corporate bonds goes up for the fourth consecutive quarter that has not happened since 2004, cited by Bloomberg. Their return will be increased by 2.6 percentage points in the first quarter of this year after record profits by 16% in 2009. The increase was the largest since the U.S. bank Bank of America Merrill Lynch results statistics for return on corporate bonds. Rally of the debt markets worldwide to enhance the appearance of first signs of recovery in the economy. As a result, companies worldwide have issued debt for 730 million dollars in this quarter, which is 25% more than the same period of 2009 interest rates in the U.S. and many developed economies fell near zero a year ago, and this has led investors to seek riskier assets and bring them higher returns. In this week showed that sales of high-risk corporate bonds rose to a record 38.9 billion dollars within the first three months of the year. These are corporate debt securities rated below Baa3 by the system of Moody’s.
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Mergers and acquisitions worldwide are gaining momentum in the first quarter of the year in the last three months were made over 2 thousand cross-border acquisitions and hostile takeovers 10. To contribute to this recovery in the global economy and stock market rally over the past 12 months. The value of takeovers increased by 5% annually during the first three months of this year to 498.24 billion dollars, cited by Bloomberg. Hostile acquisitions recorded growth of over 300 percent to 17.46 billion dollars. According to Mark Sharif, head of the Department of mergers and acquisitions for Citigroup, acquisitions may increase by 15-20% by the end of this year, provided that the global economy to shrink again. Last year, the realized value of acquisitions fell by 27 percent to 1.8 trillion. dollars, which is the lowest level for the past six years. Citigroup is one of the largest consultants in this field, she managed the sale of Asian life insurance unit of AIG, which was bought by Prudential of Britain’s 35.5 billion dollars earlier this year. It is the biggest deal in the market of mergers and acquisitions this year. Among the biggest deals this year and became hostile takeover of British chocolate maker Cadbury on the U.S. food manufacturer Kraft Foods. After four tense battle Cadbury has been absorbed by Kraft Foods for an amount of 21.4 billion dollars in February this year.
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Australia ended the monopoly of the stock exchange, permitting the creation of a second exchange for trading in shares in the country. Authorization is granted to Japan’s Nomura, but its purpose is to create competition to help develop the market. Among the main priorities of Australia has become the local stock market in the center of financial services in Asia-Pacific region, said Finance Minister Chris Bowen of the country, quoted by AP. According to him, higher competition should lead to cost reductions of about 6 million Australian citizens who have contributions to pension funds. “If Australia really wants to be considered a financial center if we are to global center for financial services, the monopoly days of our financial market must be completed,” said Bowen. Authorization for establishing a second exchange in the country is a company of Chi-X Global, which is part of network of Nomura Holdings.
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The first e-commerce platform that will allow companies that operate according to Islamic laws, to raise capital, will be launched in London in May. This Reuters reported, citing a venture capital firm behind the project. Sharia Ummah Securities Information Exchange (UMEX) is intended to provide a trading platform for companies with capitalization of at least 20 million pounds (31 million dollars) who want to raise the equivalent of at least 20 percent of their market value. Mahesh Jahayasan, chairman of the company’s Halal Industries, which will oversee the exchange, has made clear that it will work as a platform for multilateral trade exchange (Multilateral Trading Facility – MTF). MTF are low-cost e-commerce platforms, created after the EU directive on markets in financial instruments has opened opportunities for competition between exchanges. This will be the only such platform in Europe at the time, which helps companies raise capital. In UMEX opening in May of it will now have 100 shares of compliance with Islamic law companies, which can be traded. Within one year after placing their stock plans to hold IPO-so over 100 global Islamic companies said Jahayasan.
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Alan Greenspan, former chairman of the Federal Reserve (U.S. central bank) has stated that the central bank and other regulators had failed during the financial crisis because they were indifferent to risk, transmit Bloomberg. “Even with the collapse of private risk management, financial system would remain stable if the second level of protection – regulatory bodies function efficiently,” he said in a speech at the Brookings Institution. “Under the pressure of the crisis, however, they failed.” Greenspan, who headed the Fed from 1987 to 2006, said that low interest rates in his time have led to a housing bubble and the failure of regulators. “Although a number of years of our biggest banks had 10-15 permanent auditors appointed spot, they nevertheless managed to take” toxic “assets that have led them to bankruptcy,” he said. Greenspan acknowledged that he and his colleagues at the Fed did not realize the extent of the housing bubble and the consequences it can have on the economy. According to him, increased requirements for capital adequacy and liquidity to banks will help prevent future crises.
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Germany’s chemical-pharmaceutical company, Merck has entered into an agreement to buy U.S. biotech group Millipore, the value of the transaction amounted to 5,3 billion euros, says a joint release of both companies. In the value of the transaction are included and obligations of the acquiree. Agreement was approved by the boards of the groups. Merck will fund the purchase as its own cash and a loan from a consortium of banks including the U.S. Bank of America, France’s BNP Paribas and Germany’s Commerzbank. It is expected that approval of the transaction by shareholders of companies, as well as U.S. and European antitrust authorities. According to the Merck acquisition will be finalized in the second half of 2010. Communication for the purchase of Millipore comes less than a week after the company announced that its looking for a new owner. For 2009, the U.S. company has a net profit of 177 million and sales of 1.65 billion dollars. Group employs approximately 6100 people worldwide.
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