European stocks advanced for a fifth day, the longest winning streak in three months, as News Corp. offered to buy British Sky Broadcasting Plc, offsetting a plunge in German investor confidence and a rating downgrade for Greece.
BSkyB (BSY), the U.K.’s biggest pay-TV provider, led a rally among media stocks, surging 17 percent after Rupert Murdoch’s News Corp. offered to buy the rest of the company for 7.8 billion pounds ($11.5 billion). Societe Generale SA (GLE) climbed 3.9 percent after targeting 6 billion euros ($7.3 billion) of profit in 2012. UBS AG rallied 2 percent after Swiss lawmakers backed a government treaty with the U.S. over suspected tax evasion. BP (BP/) Plc closed at the lowest level since October 2008.
The Stoxx Europe 600 Index (SX5E) rose 0.7 percent to 254.28, erasing its loss for the year. The benchmark gauge has rebounded 9.6 percent from its 2010 low on May 25 after concern about the impact of Europe’s sovereign debt crisis pushed the benchmark to its cheapest level relative to earnings in more than a year.
“The state of the economy is a massive consideration as to whether you look at spending money or whether for the time being you are going to play safe,” said Keith Bowman, an analyst at Hargreaves Lansdown Plc in London. “BSkyB may be a bit more of a special situation given the relationship with Murdoch, but should we see a noticeable pick-up in mergers and acquisitions it would suggest an improvement in confidence.”
National benchmark indexes advanced in 16 of the 18 western European markets. The U.K.’s FTSE 100 (UKX) rose 0.3 percent, Germany’s DAX climbed 0.8 percent and France’s CAC 40 increased 1 percent.
German investor confidence plunged in June on concern that the sovereign debt crisis will undermine export prospects and crimp growth in Europe’s largest economy.
The ZEW (GRZEWI) said today its index of investor and analyst expectations, which aims to predict developments six months ahead, slumped to 28.7 from 45.8 in May. Economists forecast a drop to 42, according to the median of 35 estimates in a Bloomberg News survey.
Greece’s credit rating was cut to non-investment grade, or junk, by Moody’s Investors Service yesterday. The downgrade threatens to further undermine demand for the debt-strapped nation’s assets as it struggles to rein in its budget deficit.
In making the four-step downgrade to Ba1 from A3, Moody’s cited “substantial” risks to economic growth from the austerity measures tied to a 110 billion-euro ($134.5 billion) aid package from the European Union and the International Monetary Fund. The lower rating “incorporates a greater, albeit, low risk of default,” Moody’s said in a statement after the close of equity markets yesterday in London. The outlook is stable, it said.
“For the economies of southern Europe, fiscal contraction will raise the distinct possibility of a double-dip recession,” Morgan Stanley Asia Ltd. Chairman Stephen Roach said today in a Bloomberg Television interview from Hong Kong. Europe as a whole “will be able to avoid an outright contraction but it will be weak, anemic growth.”
Greek government bonds fell, and the Athens Stock Exchange General Index (ASE) lost 0.7 percent, snapping five straight gains.
Debt levels in Spain and Portugal may “snowball” in coming years and additional budget cuts are needed to meet deficit targets announced just a month ago, according to a draft European Commission document.
In the U.K., a house-price gauge climbed in May to the highest level in four months as demand from homebuyers matched rising supply, the Royal Institution of Chartered Surveyors said.
U.K. inflation slowed in May for the first time in three months as lower costs of items from food to transport eased price pressures in the economy. Consumer prices rose 3.4 percent from a year earlier, compared with 3.7 percent in April, the Office for National Statistics said today in London. Economists predicted 3.5 percent, according to the median of 30 forecasts in a Bloomberg News survey. Inflation has now exceeded the government’s 3 percent upper limit for three months.
BSkyB surged 17 percent to 700 pence. The company rejected News Corp.’s offer of 700 pence a share made today and said it would be prepared to support a bid of more than 800 pence a share. News Corp., owner of the Fox television network, holds a 39 percent stake. Its offer values the rest of BSkyB at 7.8 billion pounds ($11.5 billion).
ITV Plc (ITV), the U.K.’s biggest commercial broadcaster, gained 3.5 percent to 58.7 pence. Gestevision Telecinco SA (TL5), Spain’s largest commercial television station, rallied 5.7 percent to 8.57 euros. The Stoxx 600 Media Supersector Index climbed 2.6 percent, the biggest gain among 19 industry groups.
Societe Generale gained 3.9 percent to 36.40 euros. France’s second-biggest bank by market value said it’s aiming for profit of about 6 billion euros ($7.3 billion) in 2012, driven by growth at the corporate and investment bank and in Russia.
UBS (UBSN) gained 2 percent to 15.51 francs. Swiss lawmakers today backed the treaty with the U.S. over suspected tax evasion and asked for the possibility to put the proposal to a nationwide vote.
BP slipped 3.8 percent to 342 pence, its lowest level since 2008 after adjusting for dividend payments. The company’s credit rating was cut to two levels above non-investment grade, or junk, by Fitch Ratings on concern over the potential cost of cleaning up its Gulf of Mexico spill and meeting future liabilities.
Inmarsat (ISAT) lost 5.1 percent to 779.5 pence. BofA Merrill Lynch Global Research cut the shares to “underperform” from “neutral,” citing the risk the company may ask shareholders for money to fund the acquisition of new satellites.
Tesco Plc (TSCO) rose 0.7 percent to 394.5. The biggest U.K. retailer said same-store sales rose 0.1 percent in the 13 weeks through May 30, less than the 0.4 percent forecast by six analysts in a Bloomberg survey.
“The U.K. performance is slightly off the group’s growth rates, but still solid,” Finance Director Laurie McIlwee said on a call to journalists. Tesco isn’t changing its full-year forecast for 3 percent growth in U.K. same-store sales, he said.
Heidelberger Druckmaschinen AG (HDD) tumbled 8.4 percent to 7.98 euros after saying its full-year loss narrowed to 229 million euros from a loss of 249 million euros. The maker of printing presses also plans a capital increase to raise about 420 million euros.