European Stocks Gain After Fed Minutes, Trimming Monthly Slide
European stocks gained for a third day, trimming their biggest monthly drop since 2008, as U.S. business activity and factory orders topped forecasts and Federal Reserve minutes showed some policy makers wanted to add to stimulus measures.
Bouygues SA (EN) soared 16 percent after announcing a buyback. Smith & Nephew Plc (SN/), Europe’s biggest maker of artificial hips and knees, rallied 4.9 percent amid takeover speculation. UPM- Kymmene Oyj, Europe’s second-largest papermaker, rose 7.5 percent after saying it will close mills to cut capacity. Deutsche Telekom AG (DTE) sank 7.6 percent as the U.S. sued to block AT&T Inc.’s acquisition of its T-Mobile USA Inc. unit.
The Stoxx Europe 600 Index advanced 2.9 percent to 237.43 at the 4:30 p.m. close in London, the largest gain in two weeks. The index has still tumbled 10 percent this month, the biggest drop since October 2008, amid concern the economic recovery is at risk. The decline has left the measure trading at about 9.9 times estimated earnings, near the cheapest since March 2009, data compiled by Bloomberg show.
The minutes were “taken as a good signal because the majority agreed and the Fed said it has tools that it hasn’t yet used,” said Arnaud Scarpaci, a fund manager at Agilis Gestion SA in Paris, which oversees about $110 million. “Everyone thinks the Fed will put some sort of buying program into action to help the economy.”
National benchmark indexes gained in all of the 18 western European markets, except Greece and Iceland. France’s CAC 40 advanced 3.1 percent, the U.K.’s FTSE 100 rose 2.4 percent and Germany’s DAX added 2.5 percent. Greece’s ASE lost 4.4 percent.
Fed policy makers debated ways to invigorate the recovery and hiring this month, potentially laying the groundwork for fresh action at their next gathering in September, according to minutes of their latest meeting released late yesterday. A few members of the Federal Open Market Committee favored a “more substantial move” at the Aug. 9 meeting beyond the pledge adopted by the panel to hold rates at record lows for the next two years.
Reports today showed U.S. business activity and factory orders expanded at a faster pace than forecast.
The Institute for Supply Management-Chicago Inc.’s business barometer fell to 56.5 this month from 58.8 in July. A level above 50 indicates expansion. Economists had forecast the gauge would drop to 53.3, according to the median estimate in a Bloomberg survey. Orders placed with factories rose 2.4 percent in July, according to Commerce Department figures.
Stocks extended gains as German Chancellor Angela Merkel’s Cabinet approved proposed changes to the European Financial Stability Facility. The changes, which include expanding the EFSF to allow sovereign bond-buying powers, were agreed on by European leaders at a July summit and backed by ministers meeting in Berlin today. The draft will now go be introduced to the German parliament on Sept. 5, with lawmakers due to vote on the measures on Sept. 29.
A report today showed German unemployment fell for a 26th straight month in August and the jobless rate held at 7 percent, the lowest since records for a reunified Germany began in 1991.
Bouygues rallied 16 percent to 26.73 euros, leading construction and materials shares in the Stoxx 600 to the largest increase among 19 industry groups.
The French building, television and telecommunications company said it plans to buy back 1.25 billion euros ($1.8 billion) in stock to take advantage of equity declines to lift earnings per share.
Wienerberger AG (WIE) advanced 9.8 percent to 9.94 euros after the world’s biggest brickmaker said second-quarter profit increased 11 percent as sales surged.
Smith & Nephew added 4.9 percent to 625.5 pence. Newspapers including The Guardian, The Daily Mail and The Independent said companies from Stryker Corp. to Biomet Inc. may be interested in bidding for the company. Jon Coles, a spokesman for Smith & Nephew at Brunswick Group in London, declined to comment.
UPM-Kymmene rose 7.5 percent to 9.13 euros in Helsinki after announcing it will close mills in Finland and Germany to reduce publication paper capacity. Stora Enso Oyj (STEAV), Europe’s biggest papermaker, gained 5.8 percent to 5.09 euros.
A gauge of carmakers surged 4.3 percent for the second- biggest gain in the Stoxx 600. Bayerische Motoren Werke AG (BMW), the largest maker of luxury vehicles, rose 3.9 percent to 56.35 euros while Pirelli & C. SpA, Europe’s third-largest maker of tires, climbed 6.7 percent to 5.83 euros. Valeo SA (FR), France’s second-largest auto-parts maker, jumped 8.8 percent to 36.79 euros, the biggest increase in six months.
Vivendi SA (VIV) climbed 4.9 percent to 16.97 euros as the owner of the world’s largest video-game and music companies reported second-quarter profit excluding one-time gains and costs of 884 million euros. Analysts had predicted earnings of 780 million euros, according to the average of seven estimates compiled by Bloomberg.
Adecco SA (ADEN), the world’s largest temporary-staffing company, gained 4.4 percent to 37.63 Swiss francs while Dutch rival Randstad Holding NV (RAND) rose 5.1 percent to 23.96 euros. Monster Worldwide Inc., the biggest online-recruiting company, soared 21 percent in New York trading yesterday amid speculation that an improving economy and Fed stimulus plans will spur job searches.
Deutsche Telekom dropped 7.6 percent to 8.81 euros, the largest decline in 15 months. The U.S. government sued to block AT&T’s proposed $39 billion acquisition of T-Mobile USA, saying the deal would “substantially lessen competition” in the wireless market.
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