Most European stocks rose as the Stoxx Europe 600 Index headed for its first weekly gain in three, after euro-area leaders announced a new aid package for Greece and measures to prevent sovereign bond yields increasing.
Greek banks climbed with the Mediterranean nation’s four largest lenders all surging more than 9 percent. Vodafone Group Plc (VOD) gained 1.9 percent after posting better-than-estimated service revenue growth. Volvo AB (VOLVB) jumped 3.3 percent as the world’s second-biggest truckmaker reported second-quarter results that beat expectations.
The Stoxx Europe 600 Index rose 0.2 percent to 271.12 at 3:33 p.m. in London as two stocks gained for every one that slipped. The gauge has rallied 1.6 percent this week amid optimism that the new aid package will stop the sovereign-debt crisis spreading to the larger economies of Spain and Italy. The benchmark measure has still retreated 6.9 percent since this year’s peak on Feb. 17.
“The general view is that it appears to be a comprehensive deal that exceeded market expectations,” said James Knightley, senior economist at ING Bank NV in London. “Consequently, we are seeing something of a relief rally. However, the underlying economic fundamentals remain concerning.”
National benchmark indexes advanced in 10 of the 18 western European countries today. France’s CAC 40 Index gained 0.3 percent. The U.K.’s FTSE 100 Index (UKX) increased 0.2 percent, and Germany’s DAX Index slid less than 0.1 percent. Greece’s ASE Index rallied 5.9 percent for its biggest gain in 14 months.
Greek Aid Package
Euro-area leaders announced 159 billion euros ($228 billion) in new aid for Greece late yesterday and cajoled bondholders into footing part of the bill. Officials empowered their 440-billion euro rescue fund to buy the debt of stressed nations to help erect a firewall around Spain and Italy.
The Greek financing package will consist of 109 billion euros from the euro area and the International Monetary Fund. Financial institutions will contribute 50 billion euros after agreeing to bond exchanges and buybacks that will also cut Greece’s debt load, the leaders’ communique said.
“This meeting came at a difficult time,” German Chancellor Angela Merkel told reporters. “I’m satisfied with the outcome because the euro countries showed today that we are up to the challenge; we can take action.”
Merkel said the German parliament will probably debate the new austerity package once the country’s lower house of parliament, the Bundestag, reconvenes on Sept. 5.
European Central Bank President Jean-Claude Trichet said the ECB may accept Greek collateral if the country defaults because euro-area states will guarantee the debt.
Greek Banks Surge
National Bank of Greece SA (ETE) rallied 9.4 percent to 5.36 euros, while Piraeus Bank SA (TPEIR) soared 12 percent to 1.02 euro. EFG Eurobank Ergasias jumped 12 percent to 3.15 euros and Alpha Bank SA surged 19 percent to 3.60 euros, its biggest rally since at least 1992.
Banco Espirito Santo SA (BES) climbed 1.3 percent to 2.62 euros in Lisbon and Dexia SA gained 3 percent to 2.12 euros.
The euro-area agreement to swap privately held bonds into 15- and 30-year debt where the principal is “almost completely collateralized” will remove the risk of the single currency collapsing, analysts at Sanford C. Bernstein & Co. led by Dirk Hoffmann-Becking said in a note to clients today.
European banks were raised to “market weight” from “underweight” by Edmund Shing, an equity strategist at Barclays Plc.
“The beaten-up bank and insurance shares can now heave a short-term sigh of relief,” said Benno Galliker, a trader at Luzerner Kantonalbank AG in Lucerne. “There is some restructuring going on from rather defensive stocks to more volatile ones.”
Vodafone, Volvo Gain
Vodafone rose 1.9 percent to 164.4 pence after Europe’s third-largest phone company by sales reported that fiscal first- quarter organic service revenue climbed 1.5 percent as demand for smartphones bolstered data sales. Analysts had predicted sales growth of 1.4 percent. Data revenue jumped 25 percent as customers made more use of Apple Inc.’s iPhone and handsets running Google Inc.’s Android phone operating system.
Volvo climbed 3.3 percent to 105.40 kronor after the company said second-quarter net income rose to 5.12 billion kronor ($803 million) from 3.15 billion kronor a year earlier, as demand in Europe and North America increased. The results beat the average analyst estimate of 4.82 billion kronor. Scania AB (SCVB) jumped 5 percent to 133.70 kronor.
Adidas AG (ADS) advanced 3.2 percent to 54.82 euros after its Chief Executive Officer Herbert Hainer said that the company will have “high single-digit” revenue growth in 2011, rejecting “rumors” of a slowdown in second-quarter sales.
EasyJet Shares Rally
EasyJet Plc (EZJ) surged 17 percent to 366.5 pence, its biggest gain since 2004, after Europe’s second-biggest discount carrier said full-year earnings will beat analysts’ estimates following a 20 percent surge in business bookings. The stock was raised to “add” from “reduce” at Numis Securities Ltd.
Ryanair Holdings Plc (RYA), Europe’s largest discount carrier, jumped 5 percent to 3.47 euros in Dublin. Thomas Cook Group Plc (TCG), Europe’s second-biggest tour operator, rallied 4.8 percent to 71.3 pence.
SSAB AB (SSABA) soared 8 percent to 93.45 kronor, its biggest gain in almost three months, after the world’s largest supplier of high-tensile steel said that second-quarter net income rose to 885 million kronor from 369 million kronor a year earlier, beating analysts’ estimates.
Meyer Burger Technology AG (MBTN), the biggest maker of solar panel manufacturing equipment, slumped 6.6 percent to 30.95 Swiss francs. Roth & Rau AG (R8R) withdrew its full-year earnings forecast because of the “deterioration in the overall industry climate,” the company’s Vice President of Sales and Marketing said today. Meyer Burger agreed to acquire Roth & Rau on April 11. Roth & Rau’s shares slid 2.4 percent to 21.90 euros.
Syngenta AG (SYNN) dropped 2.4 percent to 267.70 Swiss francs after the world’s largest maker of agricultural chemicals said it plans to raise prices for the 2012 planting season to counter soaring raw-material costs.
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