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Market Update

ECB Cuts Off Direct Lending to Greece, AstraZeneca Swings to Loss

Author: Nigel Thomas
Last Update: 1:07 PM ET February 05 2015

4:00 PM Frankfurt – AstraZeneca net swung to a loss to $321 million and agreed to acquire respiratory business rights from the U.S.-based Actavis for $600 million. Smith & Nephew net fell 1% to $160 million. Vodafone revenues in the third-quarter climbed 14% to £10.9 billion.

European markets were under pressure after the ECB tightened bail out conditions for Greece.

European Central Bank said Greek bonds will not be eligible for collateral and also stopped direct funding.

The ECB announced the move late night on Wednesday and had not signalled that such an action was in the making. Greece will continue to rely on emergency funding provided by the central bank but the access to Emergency Liquidity Assistance will come at an interest rate of 1.5% compared to direct loans from the ECB at 0.05%.

Stocks in Athens declined 5.4% and banks dropped more than 8% after the ECB statement this morning.

Bank of Greece reassured investors and banks that there is sufficient liquidity in the market and banks are “adequately capitalized.”

German finance minister Wolfgang Schaeuble and Greek counterpart were scheduled for a meeting at 12:30 p.m. in Berlin.

Greek leaders are facing an uphill task in winning the support of finance ministers in the euro zone who must approve any changes in bailout conditions or roll back in austerity measures. Only France has publicly supported Greek demand.

Greece is expected to run out of cash by the end of March in the event if ECB or other international lenders fail to advance new loans.

Lenders are reluctant to issue new loans to Greece after the Prime Minister Alexis Tsipras has promised to increase pensions and wages that will violate Greek bailout terms.

In London trading, FTSE 100 index slid 0.3% or 17.78 to 6,842.24 and in Frankfurt the DAX index slipped 0.7% or 73.90 to 10,837.42.

In Paris, CAC 40 index fell 0.4% or 20.46 to 4,675.84.

AstraZeneca Plc dropped 3.1% to 4,540.50 pence after the U.K.-based biopharmaceutical company said revenues in the fourth-quarter ending in December fell 2% to $6.68 billion from $6.84 billion a year ago period.

Net loss in the quarter swung to a loss from a year ago to $321 million compared to profit of $1.54 billion and loss per share swung to 25 cents from earnings per share of $1.23.

Separately, today the company agreed to acquire the rights to Actavis’ branded respiratory business in the U.S. and Canada for an initial consideration of $600 million.

The transaction is expected to complete in this first quarter.

ARM Holdings Plc gained 1.2% to 1,081.71 pence on a speculation that the U.K.-based microprocessor maker may be acquired by Apple Inc.

Smith & Nephew Plc jumped 2.3% to 1,194.01 pence after the U.K.-based medical devices maker said revenues in the fourth-quarter ending in December increased 2% to $1.25 billion from $1.18 billion a year ago period.

Net income in the quarter fell 1.2% from a year ago to $160 million compared to $162 million and diluted earnings per share slipped to 17.8 cents from 18 cents.

Vodafone Group Plc declined 3.1% to 229.28 pence after the U.K.-based largest mobile communication service provider reported group revenues in the third-quarter ending in December climbed 13.5% to £10.88 billion and EBITDA and reaffirmed annual operating earnings outlook between £11.6 billion and £11.9 billion.

Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc