European stocks advanced for a third day as the International Monetary Fund raised its global growth forecast and banks climbed on optimism stress tests will ease concern about the health of the financial system.
Mining companies Xstrata Plc and Antofagasta Plc rose at least 2.9 percent. BNP Paribas SA, France’s largest bank, and Barclays Plc rallied as Credit Suisse Group AG recommended investors increase their holdings of bank stocks. A.P. Moeller- Maersk A/S jumped 3.7 percent after the world’s largest container shipper raised its earnings forecast.
The Stoxx Europe 600 Index climbed 1 percent to 248.6, trimming the decline from this year’s high in April to 8.7 percent. The Stoxx 600 is trading at about 11.5 times estimated earnings, near the lowest valuation in more than a year, according to Bloomberg data.
“We are seeing quite a bit of rebalancing by institutions out of fixed income and into equities,” said Andy Lynch, who manages about $1.9 billion at Schroder Investment Management in London. “The trading seems to suggest there is some real interest in the market going on. Equities down at this level are probably a good bet.”
National benchmark indexes rose in 17 of the 18 western European markets and extended gains after a U.S. report showed initial jobless claims fell more than economists estimated. The U.K.’s FTSE 100 rallied 1.8 percent, Germany’s DAX climbed 0.7 percent and France’s CAC 40 advanced 1.6 percent.
The IMF late yesterday revised its global growth outlook to 4.6 percent in 2010, reflecting a stronger-than-expected first half. That would be the biggest gain since 2007 and compares with the Washington-based fund’s April projection of 4.2 percent. Growth next year is projected to be 4.3 percent, unchanged from the April forecast.
U.S. Labor Department figures today showed the number of Americans applying for jobless benefits last week fell by 21,000 in the week ended July 3 to 454,000. An Australian report showed job growth capped the best quarter in almost four years in June, increasing 45,900 last month.
“The economy is moving forward,” Schroder’s Lynch said. “It is slow but at least it’s going on the right direction. Having been positioned very defensively, we are now trying to take some baby steps into more cyclical stocks.”
Xstrata, the world’s fourth-largest copper producer, jumped 2.9 percent to 936 pence. Antofagasta, owner of copper mines in Chile, increased 3.4 percent to 851.5 pence, while BHP Billiton Ltd., the world’s largest mining company, rose 1.7 percent to 1,819 pence.
BNP Paribas led a measure of bank shares to the second- biggest gain among 19 industry groups in the Stoxx 600, climbing 3.3 percent to 49.57 euros. Barclays, the U.K.’s second-biggest lender, advanced 3.6 percent to 302 pence. Bank of Ireland Plc surged 6.7 percent to 71.3 euro cents.
The European Union said late yesterday it is carrying out stress tests on 91 banks, accounting for 65 percent of the region’s banking industry, to examine whether they can withstand a shrinking economy and a drop in government bond values.
The lenders being tested include 14 from Germany, six from Greece and four from the U.K., the Committee of European Banking Supervisors said. EU banking regulators have told lenders that their planned stress tests may assume a loss of about 17 percent on Greek government debt and 3 percent on Spanish bonds, two people briefed on the talks said yesterday.
Strategists at Credit Suisse raised their recommendation for banks to “benchmark,” saying European sovereign-debt risk is overstated, bank stocks are undervalued and the EU stress tests “may be a positive catalyst.”
“The very fact that a stress test is taking place is positive,” Credit Suisse’s London-based strategist Andrew Garthwaite wrote in a report today. “We doubt that stress tests would be announced if they were going to disappoint the market.”
Deutsche Bank AG analyst Matt Spick wrote in a report dated yesterday that he expects most banks to pass the stress tests and sees “fundamental reasons to be positive on selected names.”
Lloyds Banking Group Plc jumped 4.3 percent to 60.7 pence as BofA Merrill Lynch Global Research reiterated its “buy” recommendation, saying the U.K. lender’s shares may double within two years.
Old Mutual, HSBC
Old Mutual Plc gained 3.5 percent to 113.1 pence after Sky News reported that HSBC Holdings Plc is in the early stages of assessing a bid for Nedbank Group Ltd., which is majority owned by the insurer. HSBC spokesman Adrian Russell declined to comment. HSBC stock rose 1.4 percent to 623.2 pence.
Maersk climbed 3.7 percent to 53,000 kroner. The company said full-year net income, excluding minority interests, will exceed the $3.5 billion reported for 2008 as freight prices return to levels before the financial crisis.
Abertis Infraestructuras SA rallied 3.8 percent to 14.60 euros in Madrid. Shareholders Criteria CaixaCorp SA and Actividades de Construccion y Servicios SA together with CVC Capital Partners Ltd. will offer 16 euros per share to buy the rest of Spain’s biggest highway operator, Expansion reported. The newspaper did not identify who provided the information.
TGS-Nopec Geophysical Co. ASA posted the biggest drop in the Stoxx 600, sliding 6 percent to 78 kroner. The Norwegian surveyor of oil deposits forecast a 10 percent drop in second- quarter sales after delays in a Norwegian licensing round and carrying out seismic surveys in the Gulf of Mexico.