European Stocks Extend Four-Month High as Automakers Advance
Sept. 9 (Bloomberg) -- Jeremy Beckwith, who oversees about $31 billion as chief investment officer at Kleinwort Benson, talks about the outlook for the European economy and his investment strategy. Beckwith speaks with Francine Lacqua on Bloomberg Television's "On the Move." (Source: Bloomberg)
European stocks rose for the fourth time in five days, extending a four-month high, after a report showed fewer-than-estimated Americans applied for jobless benefits last week.
Barclays Plc led banks higher as the U.S. labor report boosted confidence in the strength of the world’s biggest economy. Daimler AG paced a measure of carmakers to the highest level since October 2008 as Credit Suisse Group AG lifted its earnings estimates. ARM Holdings Plc surged 4 percent after unveiling a new processor.
The Stoxx Europe 600 Index gained 1.1 percent to 265.09 at the 4:30 p.m. close in London, the highest level since April 26. The benchmark measure for European equities has rallied 14 percent from this year’s low in May amid easing concern that efforts by European countries to tame their budget deficits may push the global economy into another recession.
“When we don’t double-dip, all the money that has moved into government bonds, you wait and see what happens when that all comes out,” Anthony Dwyer, chief equity strategist at Collins Stewart, said in a radio interview on “Bloomberg Surveillance” with Tom Keene. “The direction of earnings is higher, costs have not been increased and interest rates are extraordinarily low and stimulative and that should lead to much higher stock prices down the road.”
National benchmark indexes rose in 16 of the 18 western European markets today. The U.K.’s FTSE 100 and France’s CAC gained surged 1.2 percent. Germany’s DAX climbed 0.9 percent.
U.S. Economy
U.S. initial jobless claims dropped by 27,000 to 451,000 in the week ended Sept. 4, Labor Department figures showed today in Washington, easing concern that employers will accelerate firings as the economy cools. The total number of people receiving unemployment insurance was little changed, while those getting extended payments rose.
The Federal Reserve said after the close of European markets yesterday that the U.S. economy maintained its expansion while showing “widespread signs of a deceleration” in mid-July through the end of August, according to a survey by 12 regional Fed banks. The global economic recovery is proving slower than projected and policy makers may need to extend or bolster stimulus programs to support it, the Organization for Economic Cooperation and Development said today.
BOE Rates
In the U.K., the Bank of England maintained its emergency bond-purchase plan and left its benchmark interest rate at a record low. The nine-member Monetary Policy Committee held the target for bond holdings at 200 billion pounds ($308 billion), as forecast by all 31 economists in a Bloomberg News survey, and kept the interest rate at 0.5 percent.
“Within the developed world, we maintain our current preference for Europe over the U.S. and Japan,” said Bill O’Neill, Merrill Lynch Wealth Management’s chief investment officer for Europe, the Middle East and Africa, who helps manage about $1.4 trillion. “The economic outlook for Europe is more favorable than the U.S. and Europe also offers higher yield and greater sales exposure to emerging economies.”
Daimler advanced 2.6 percent to 43.08 euros as measure of auto-industry shares posted the largest gain among 19 industry groups in the Stoxx 600. The world’s second-biggest maker of luxury cars is likely to increase its full-year forecast for earnings before interest and taxes to more than 7 billion euros ($8.9 billion) from 6 billion euros currently, Credit Suisse analyst Arndt Ellinghorst wrote.
Fiat, Peugeot
Fiat SpA, Italy’s biggest automaker, advanced 1.9 percent to 9.99 euros as JPMorgan Chase & Co. lifted its recommendation to “neutral” from “underweight.”
PSA Peugeot Citroen and Renault SA, France’s largest automakers, rallied 4.6 percent to 22.65 euros and 3.2 percent to 35.25 euros, respectively.
Banks were the second-best performing industry today. Barclays, the U.K.’s third-biggest bank, climbed 5 percent to 323.35 pence. Lloyds Banking Group Plc advanced 3.3 percent to 74.67 pence after UBS AG said the lender is “overcapitalised” and may start to return cash to shareholders. The broker has a “buy” recommendation on the shares.
Robert Peston, the British Broadcasting Corp.’s business editor, reported on his blog that regulators will ask banks to hold a core Tier 1 ratio of 7 percent as part of Basel III rules to be completed on Sept. 12. That is lower than the 8 percent to 9 percent demanded by countries including the U.S., the U.K. and Switzerland.
ARM Advances
ARM gained 4 percent to 403.2 pence, the highest level since 2001, as it unveiled a new processor. This “new product announcement is a potential game changer,” Aviate Global analysts wrote in an e-mail to clients today. “It offers five times the performance of today’s best in class smartphone processors.”
Ebro Foods SA climbed 5.7 percent to 14.86 euros on speculation savings bank Caja Duero has completed selling its stake in the Spanish food company.
Home Retail Group Plc and HMV Plc led British retail shares lower. Home Retail, the U.K. owner of Argos catalog stores and the Homebase home-improvement chain, sank 2.8 percent to 215.2 pence after saying it expects full-year earnings to be in the “bottom half” of analysts’ estimates after sales slipped amid a “challenging” market.
HMV slumped 11 percent to 59.25 pence, the most since December 2008, as the music and DVD retailer said sales at outlets open at least a year in the U.K. and Ireland fell 15 percent in the 19 weeks ended Sept. 4. The retailer also said its finance director, Neil Bright, will leave the company in December to join Holidaybreak Plc.
Vestas Wind Systems A/S retreated 3.9 percent to 209.4 kroner, the second-biggest decline in the Stoxx 600, as the world’s largest maker of wind turbines said a six- to seven- meter (20 to 23 feet) portion snapped off a blade of the test V112 wind turbine late yesterday in Lem, western Denmark.
Separately, Danske Bank A/S reduced its recommendation on the shares to “reduce” from “buy.”
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net.
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