European stocks gained for a second day as speculation grew that U.S. lawmakers will agree to increase the nation’s debt ceiling and banks rallied before tomorrow’s European Union summit on the region’s debt crisis.
Dexia SA (DEXB) and Commerzbank AG (CBK) jumped more than 6 percent. BHP Billiton Ltd. (BHP), the world’s largest mining company, gained 1.7 percent after reporting increased iron-ore output. ARM Holdings Plc (ARM) climbed 4.9 percent after Apple Inc. (AAPL)’s earnings exceeded analyst estimates.
The benchmark Stoxx Europe 600 Index rallied 1.3 percent to 267.73 at the 4:30 p.m. close in London, the biggest increase in three weeks. The measure has still retreated 8.1 percent from this year’s high on Feb. 17 amid growing concern the region’s debt crisis is spreading from Greece to Italy and Spain.
“Markets seem to be getting convinced U.S. lawmakers will agree on the debt ceiling,” Mikkel Petersen, a senior equities adviser at Nordea Private Bank in Copenhagen, wrote in a report to clients. “On top of that, corporate reports in the U.S. have been very good.”
Of the 61 companies in the Standard & Poor’s 500 Index that have reported earnings since July 11, 54 have exceeded analysts’ per-share profit estimates, according to data compiled by Bloomberg. In Europe’s Stoxx 600, 21 companies missed forecasts and 14 surprised positively, the data show.
President Barack Obama praised a bipartisan Senate proposal for a $3.7 trillion debt-cutting plan as U.S. lawmakers intensify efforts for a compromise on government spending less than two weeks before a threatened default. Obama said he will renew talks at the White House this week with congressional leaders as the Democratic-led Senate and Republican House pursue divergent paths toward ending the stalemate over lifting the nation’s $14.3 trillion debt limit by Aug. 2.
European leaders are meeting in Brussels tomorrow to discuss measures to restore confidence in the euro region’s creditworthiness. Greek Prime Minister George Papandreou said Europe’s leaders need to show they can resolve the debt crisis to avoid a contagion enveloping Italy and Spain in a “make-or- break moment.”
European officials are considering steps previously rejected by Germany, including the use of precautionary credit lines and enabling the main 440 billion-euro ($624 billion) rescue fund to lend to recapitalize banks, according to a person close to the discussions who declined to be identified because the talks are in progress.
“Investors are probably buying banks hoping something will happen tomorrow at the EU summit,” said Hendrik Koenig, an equity strategist at B. Metzler Seel. Sohn & Co. KGaA in Frankfurt. “If they can solve the euro crisis, banks could rise even further due to their low historic valuation. It’s all about changing the minds of investors because you won’t see the effect of these austerity measures until two or three years down the road.”
Global investors cut their holdings of European stocks to the lowest level in more than a year this month amid concern a euro-region nation will default, a BofA Merrill Lynch Global Research survey showed. A net 22 percent of 265 respondents, who together manage $792 billion, were “underweight” euro-region equities in July, compared with 15 percent in June.
A gauge of banks in the Stoxx 600 climbed 3.7 percent, the most in six months. Dexia, Belgium’s biggest bank, soared 8.6 percent to 1.89 euros and Commerzbank, Germany’s second-biggest lender, rose 6.3 percent to 2.51 euros.
BHP Billiton advanced 1.7 percent to 2,364.5 pence after iron-ore output rose 14 percent in the three months to June 30, driving an 11th straight annual production record as Chinese demand send prices to all-time highs. BHP also said full-year petroleum output rose, boosted by the $4.75 billion acquisition of Chesapeake Energy Corp.’s shale assets in Arkansas.
Rio Tinto Group, the world’s second-largest miner, increased 1.3 percent to 4,420.5 pence. Boliden, a Swedish copper and zinc miner, rose 1.8 percent to 115 kronor after Nordea Bank AB recommended buying the shares.
ARM, the designer of chips for Apple’s iPhone, advanced 4.9 percent to 611 pence. Apple said third-quarter net income more than doubled to $7.31 billion, or $7.79 a share, from $3.25 billion, or $3.51, a year earlier. Analysts had predicted profit of $5.87 a share, according to Bloomberg data.
European Aeronautic Defence and Space Co., the parent company of Airbus, surged 3.6 percent to 24.79 euros after AMR Corp.’s American Airlines agreed to buy 260 jets.
Accor SA (AC) increased 2.8 percent to 30.31 euros as France’s largest hotel operator said revenue growth at its lodgings accelerated in the second quarter, led by the domestic French market.
Renewable Energy Corp. ASA surged 20 percent to 10.97 kroner in Oslo trading after its biggest shareholder, Orkla AS, said the current share price is too low for it to consider divesting its 39 percent stake.
Trelleborg AB (TRELB), the world’s biggest maker of vibration dampening gear, jumped 8.7 percent to 71.60 kronor after saying second-quarter pretax profit was 469 million kronor ($73 million), exceeding analyst estimates of 424 million kronor.
London Stock Exchange Group Plc (LSE) climbed 3.4 percent to 1,030 pence after first-quarter sales rose 2 percent, boosted by income from capital markets and information services.
Marine Harvest ASA (MHG), slumped 8.8 percent to 3.26 kroner, the lowest level in two years. The world’s largest salmon farmer said second-quarter net income slid 8 percent to 676 million kroner ($123 million), trailing the average estimate of 705 million kroner from 12 analysts in a Bloomberg survey.
To contact the reporter on this story: Peter Levring in Copenhagen at Plevring1@bloomberg.net
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