European stocks surged to a three- month high as HSBC Holdings Plc and BNP Paribas SA led a rally in banks and basic-resource producers climbed with base metals.
HSBC, Europe’s biggest bank, and BNP Paribas, the largest lender in France, rallied more than 5 percent after reporting earnings that topped estimates. BHP Billiton Ltd., the world’s biggest mining company, climbed 4.3 percent. Linde AG advanced 3.8 percent after the second-largest maker of industrial gases also posted increased profit.
The benchmark Stoxx Europe 600 Index soared 2.6 percent to 262.09 at the 4:50 p.m. close in London, the highest level since April 26. The gauge has surged 13 percent from this year’s low on May 25 as concern eased that efforts by European governments to curb their budget deficits may derail the economic recovery.
“The results season is providing further evidence for our view that the European market has overreacted to concerns about the impact of the sovereign debt crisis on economic activity,” Ian Scott, a London-based strategist at Nomura Holdings Inc., wrote in a report to clients. “Both the surprise and underlying growth numbers are strong, helping to override concerns about a double-dip scenario, which has been weighing on markets.”
Almost 60 percent of companies in the Stoxx 600 to have reported earnings since July 12 have topped analysts’ estimates for net income, according to data compiled by Bloomberg.
National benchmark indexes climbed in all of the 17 western European markets that were open today. Germany’s DAX gained 2.3 percent, the U.K.’s FTSE 100 rallied 2.7 percent and France’s CAC 40 advanced 3 percent. Icelandic exchanges were closed for a holiday.
Stocks extended gains after separate reports showed manufacturing and construction spending in the U.S. exceeded economist estimates. Other figures today showed European manufacturing expanded in July by the most in three months.
HSBC climbed 5.3 percent to 680 pence after first-half pretax profit more than doubled to $11.1 billion as the North American unit returned to profit and bad-debt provisions dropped by 46 percent. That compared with the average analyst estimate of $8.8 billion.
BNP Paribas surged 5.3 percent to 55.49 euros after the bank reported a 31 percent increase in second-quarter net income to 2.11 billion euros ($2.76 billion) as bad-loan provisions dropped to the lowest level since before Lehman Brothers Holdings Inc.’s 2008 bankruptcy. Earnings topped the 1.61 billion-euro median estimate of eight analysts surveyed by Bloomberg.
Lloyds Banking Group Plc, which releases results on Aug. 4, gained 4.6 percent to 72.44 pence. The U.K.’s largest mortgage lender expects to post a 1 billion-pound ($1.58 billion) profit for the first half of the year, according to the Financial Times. Barclays Plc, which is scheduled to report on Aug. 5, climbed 3.4 percent to 343.95 pence.
EFG Eurobank Ergasias SA, Greece’s second-biggest bank, jumped 14 percent to 6.70 euros for the biggest gain in the Stoxx 600. Alpha Bank SA, the nation’s third-largest lender, soared 8.1 percent to 6.30 euros.
BHP Billiton rose 4.3 percent to 2,034.5 pence as copper climbed for a fourth day. Rio Tinto Group, the world’s third- biggest mining company, gained 4.4 percent to 3,450 pence. Xstrata Plc jumped 5.9 percent to 1,075 pence.
Linde advanced 3.8 percent to 93.32 euros. The maker of industrial gases reiterated a target of reaching a full-year earnings record as a rebound in sales helped second-quarter profit jump to 247 million euros.
Intertek Group Plc jumped 6.2 percent to 1,674 pence after the inspection-services company said first-half revenue rose to 652.6 million pounds, citing an improved 2010 outlook.
Hammerson Plc gained 2.7 percent to 398.7 pence after the U.K.’s third-largest real-estate investment trust reported a first-half profit 333 million pounds as the value of its properties grew. That compares with a loss of 786.1 million pounds a year earlier. Net asset value increased by 7.8 percent.
Nokia Oyj climbed 2.7 percent to 7.29 euros and Siemens AG advanced 3.8 percent to 77.62 euros. The Wall Street Journal reported that Nokia Siemens Networks, a joint venture between the two companies, is in discussions with buyout companies including Silver Lake Partners, TPG Capital, Blackstone Group LP, Bain Capital LLC and KKR & Co. about obtaining a minority stake for at least $1 billion in cash. The newspaper cited unidentified people familiar with the talks.
TNT NV retreated 3.7 percent to 22.01 euros, the largest drop in the Stoxx 600. Europe’s second-biggest express-delivery company reported a 96 percent decline in quarterly profit on a one-time charge to reorganize the mail division.