Europe Stocks Rise on U.S. Consumer Spending, Greek Bank Merger

European stocks rose after two days of losses dragged equities near to the cheapest valuation in more than two years and a report showed U.S. consumer spending gained in July.

EFG Eurobank Ergasias SA (EUROB) and Alpha Bank SA jumped by the maximum 30 percent after agreeing to merge to create Greece’s biggest bank, driving the ASE Index to the biggest gain in 21 years. Munich Re and Swiss Re Ltd., the world’s largest reinsurers, advanced more than 4 percent as the damage from Hurricane Irene in the U.S. was less severe than estimated.

The Stoxx Europe 600 Index rose 1.2 percent to 228.28 at the 4:30 p.m. close in London. The gauge has still fallen 22 percent from this year’s peak on Feb. 17 as European and U.S. economic reports trailed forecasts, adding to concern that the global economic recovery is at risk. The decline has left the measure trading at 9.5 times estimated earnings, near the cheapest since March 2009, data compiled by Bloomberg show.

“When U.S. consumer spending data is improving, it’s a very good indicator that the U.S. economy is improving,” said Daniel Weston, a portfolio adviser at Schroeder Equities GmbH in Munich. “Today’s personal-spending numbers give further justification that the market is oversold, and signals the economy is recovering stronger than expected.”

National benchmark indexes rose in all of the western European markets that were trading today as U.K. equities were closed for a holiday. France’s CAC 40 rose 2.2 percent and Germany’s DAX Index advanced 2.4 percent. Greece’s ASE soared 14 percent, the most since 1990.

‘Great News’

The merger of Eurobank and Alpha Bank is “great news,” said Jacques Porta, a fund manager at Ofi Patrimoine in Paris, who helps oversee about $400 million in stocks. “Investors are waiting for a restructuring of the financial system so it’s very positive, especially as the merger is taking place in the country that was the most affected by the crisis.”

The Stoxx 600 advanced for the first week in five last week as Federal Reserve Chairman Ben S. Bernanke indicated the economy isn’t deteriorating enough to warrant any immediate stimulus. He said a second day has been added to the next policy meeting in September to “allow a fuller discussion” of the economy and the Fed’s possible response.

Investors are paying less for U.S. equities than they have during every recession since Ronald Reagan was president amid growing concern that the economy is on the edge of another recession. The Standard & Poor’s 500 Index has lost 13 percent in the past five weeks, sending its price-earnings ratio down to 12.9. That’s 3.5 percent less than the average multiple during the 10 contractions since 1949 and a level last reached in 1982, according to data compiled by Bloomberg.

U.S. Economy

A report today showed U.S. consumer spending climbed more than forecast in July. Purchases rose 0.8 percent, the biggest gain since February, after a 0.1 percent decline the prior month, according to Commerce Department figures. The median estimate of 74 economists surveyed by Bloomberg News called for a 0.5 percent increase. Incomes grew 0.3 percent, pushing the savings rate to a four-month low.

Eurobank and Alpha Bank, Greece’s second- and third-biggest banks, rallied 29 percent to 2.24 euros and 30 percent to 2.47 euros, respectively. The gains were the biggest allowed in one day on the Athens exchange.

Alpha, Eurobank

Alpha Bank will acquire Eurobank as they seek to ride out a deepening recession and the country’s sovereign debt crisis. Alpha offered Eurobank shareholders five new shares for each seven they hold, or 0.714 Alpha shares for each Eurobank share, according to a statement today.

The combined company, to be known as Alpha Eurobank, will implement a 3.9 billion-euro ($5.7 billion) effort to strengthen its finances, including a 1.25 billion-euro rights offer, a 500 million-euro convertible note to be taken up by Qatari-backed Paramount Services Holding Ltd. and 2.1 billion euros of internal measures.

National Bank of Greece SA (ETE), the country’s largest bank, surged 29 percent to 3.59 euros while Piraeus Bank SA (TPEIR) jumped 29 percent to 72 euro cents. Public Power Corp. SA, Greece’s biggest electricity producer, rallied 24 percent to 6.81 euros.

Munich Re gained 4 to 89.17 euros, and Swiss Re advanced 4.4 percent to 41.48 Swiss francs.

Hurricane Irene’s estimated cost to insurers fell to about $2.6 billion in the U.S. as the storm lost strength en route to New York, according to Kinetic Analysis Corp., a firm that predicts the effects of disasters. That compares with a projection last week from the Silver Spring, Maryland-based company of as much as $14 billion.

Holcim, Vinci

Construction companies posted the best performance among 19 industry groups in the Stoxx 600 as Holcim Ltd. (HOLN), the world’s second-biggest cement maker, rallied 4.4 percent to 48.29 Swiss francs and Vinci SA, Europe’s largest builder, rose 4.2 percent to 35.39 euros.

ProSiebenSat.1 Media AG (PSM) soared 6.9 percent to 12.63 euros as Germany’s biggest private broadcaster said it will repurchase up to 2.5 million non-voting, preferred shares.

Banco Popolare SC (BP) added 2.4 percent to 1.15 euros as Italy’s fifth-biggest bank approved a plan to merge some units into the holding company as part of measures to increase efficiency and reduce costs. The lender said second-quarter net income fell 63 percent to 131.4 million euros.

Nordea AB rose 3.5 percent to 57.50 kronor. The Nordic region’s biggest bank said it plans to cut a total of 2,000 workers and has started talks with unions on the reductions to trim costs and boost profits.

Roche Rises

Roche Holding AG (ROG) gained 1 percent to 137.90 Swiss francs. The company said it expects government austerity measures to boost its medical-diagnostics unit in the next three to five years thanks to broader use of tests to see which patients should use expensive treatments.

Landi Renzo SpA (LR) slid 3.5 percent to 1.64 euros, the lowest since the company’s initial public offering in June 2007, as BofA Merrill Lynch Global Research downgraded the Italian maker of injection systems for alternative fuels to “underperform” from “buy.” Intermonte SIM SpA also cut its recommendation on the stock to “underperform.”

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer in London at arummer@bloomberg.net;

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