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Market Update

Euro Rise to Year-High; Arcandor Troubles

Author: 123jump.com Staff
Last Update: 4:13 PM ET May 22 2009

8:00 PM Frankfurt, Paris; 3:00 PM New York – European markets were focused on the direction of euro-dollar relationship. More investors are forecasting the loss of top rating for dollar. European nations are also running high deficits as economies slow in Germany, Spain, France and Italy.

Euro reached near yearly high against dollar as more investors question how long it will be before the U.S. credit rating is lowered. The U.S. government is likely to offer bonds to raise $3.2 trillion to finance the budget.

Just to put the scale of the debt in perspective, UK is expected to offer 220 billion pounds of bonds to finance the budget deficit.

France, Greece, Ireland, Spain, Malta and Latvia had already exceeded 3% budget deficit in 2008 and Germany and Italy are expected to join exceed in 2009.

Nervous investors in currency trading pushed dollar near the low of $1.40 for each euro and the prospect of further decline cannot be ruled out. Dollars of Canada, Australia and Japanese yen have been edging higher in the last five weeks.

The estimate of the UK GDP first quarter contraction was unrevised to 1.9% on weak output in manufacturing, construction and household spending. The quarterly declined was 4.1% from a year ago first quarter.

The economy declined at 0.6% in the third quarter and 1.6% in the fourth quarter of 2008.

Gainers & Losers

Air France- KLM Group declined to €10.68 after its airline pilots union declared intention to strike on weekends between July 10 and August 3. The industry is bracing for tough times and British Airways today reported annual loss of 375 million pounds.

Pernord Ricard SA declined 1% to €44.95 after Morgan Stanley rated the stock “underweight” on weaker than expected earnings outlook.

Renault SA increased 3.6% to €26.26 after Royal Bank of Scotland raised its outlook on the stock. The recent French government incentives have helped automakers in France to sustain sales.

K+S AG increased 5% to €53.58 led the gainers in Frankfurt trading second time this week after investors surmised that the company will beat earnings expectations in the current quarter.

Salzgitter AG increased 4.4% to €63.18 after analysts in London speculated earnings surprise in the latter part of 2009.

Arcandor AG declined 4.4% to €2.16 after the company warned that it needs a government bailout by July 12 to survive. Rival Metro AG gained 3.3% €36.36 after the talks between the two retailers reached nowhere. Arcandor is seeking €650 million from the Germany Fund launched by the German Federal Government. The owner of Karstadt and Kauhof retailer in Germany employs 53,000 and 86,000 worldwide.

Earnings Review

Atrium European Real Estate Limited, Austria’s second-largest property company said first quarter net rental income rose 13% to €29 million from €25 million a year ago. Net loss in the year was €231.7 million compared to net profit of €3 million a year ago.

DAX Index Movers

MAN AG led the decliners in the DAX index of 2.57% followed by losses in Bayerische Motoren Werke AG of 1.58%, in Merck KGaA of 1.45%, in Bayer AG of 1.08%, in Linde AG of 1.04%.

K+S AG led gainers in the DAX index with a rise of 5.1% followed by gains in Salzgitter AG of 4.36%, in METRO AG of 2.98%, in Deutsche Post AG of 1.79%, in Hannover Rueckversicherung AG of 1.62% .

CAC-40 Index Movers

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