European stocks advanced as the region’s leaders gathered in Brussels for the second summit in four days to address the debt crisis and after U.S. durable- goods orders and home sales topped forecasts.
Merck KGaA jumped the most in more than two years as the drugmaker posted profit that beat analysts’ estimates. Pandora A/S soared 12 percent amid speculation the Danish jeweler won’t lower its earnings outlook this close to reporting results. Nyrstar (NYR) NV slid 8.5 percent as the world’s biggest producer of refined zinc cut its mine-output forecast.
The benchmark Stoxx Europe 600 Index increased 0.2 percent to 240.8 at the close of trading, having swung between gains and losses at least 20 times. The measure has rallied 12 percent from this year’s low on Sept. 22 amid speculation policy makers will reach agreement on a solution to the region’s debt woes.
“There is scope for great disappointment” from the summit, Gary Jenkins, head of fixed income at Evolution Securities in London, said in a report. “Though, if there seems to be general agreement on the bigger scheme and a tight timeframe for the details to be worked out, markets may give them the benefit of the doubt.”
European leaders are meeting in Brussels for the 14th crisis summit in 21 months to discuss Greece’s second bailout, the recapitalization of banks and strengthening the 440 billion- euro ($612 billion) rescue fund into a more potent weapon.
Expanded Bailout Fund
German lawmakers backed increasing the bailout fund’s capacity today, removing one hurdle in the path of a regional agreement. EU leaders may ask national finance ministers to determine the firepower of the expanded European Financial Stability Facility by the end of November, an EU official said.
The Stoxx 600 pared an earlier gain of 1.2 percent today as an official said EU talks with banks on bondholder losses as part of a second Greek rescue package are deadlocked and have been suspended. While policy makers and bankers are converging on a 50 percent writedown for Greece’s lenders, the disagreement centered how much of the risk of newly issued Greek bonds should be insured, the EU official said on condition of anonymity because the talks are private.
“Markets know what may come from Brussels tonight will not be a full and final solution,” said Thomas Haerter, chief strategist at Swisscanto Asset Management AG in Zurich, who helps oversee about $67 billion. “The problem will only ultimately be solved when debt ratios are much lower in the problem countries than they are today.”
The Stoxx 600 is trading at 10.4 times the estimated earnings of its companies, compared with the two-year low of 9.1 reached on Sept. 23, according to data compiled by Bloomberg. Of the 75 companies in the Stoxx 600 that have released earnings since Oct. 11, 30 missed analyst profit estimates, Bloomberg data show.
In the U.S., orders for durable goods excluding transportation equipment rose in September by the most in six months, showing manufacturing is supporting the expansion. Purchases of new houses gained more than forecast as discounted prices lured buyers in some parts of the country.
Merck KGaA (MRK) advanced 8.5 percent to 65.07 euros, the biggest gain since January 2009. The German maker of cancer drug Erbitux reported third-quarter profit that beat analysts’ estimates because of growth at the Merck Serono pharmaceutical and Millipore equipment businesses.
Pandora, the Danish jewelry maker that plunged 65 percent on Aug. 2 after cutting its full-year forecast, advanced 12 percent to 47.90 kroner.
“There is an element of relief as markets feared another downgrade,” said Jens Houe Thomsen, an analyst at Silkeborg, Denmark-based Jyske Bank A/S. “We’re one month into the final quarter of the year and if they were to deliver another substantial downgrade it would have arrived by now.”
About 8.6 percent of Pandora shares are on loan, an indication of short-sellers’ interest, according to research firm Data Explorers.
Telenor ASA (TEL) climbed 5.3 percent to 97.40 kroner as the largest phone company in the Nordic region boosted its outlook for full-year sales and profitability after third-quarter earnings increased.
Nyrstar declined 8.5 percent to 6.14 euros in Brussels, the biggest drop in two months. The zinc producer lowered its forecast for output from mines because of lower-than-expected deliveries from Talvivaara Mining Co.’s Finnish site, where it has an offtake agreement.
Adidas AG (ADS), the world’s second-biggest sporting goods maker, slid 3 percent to 49.68 euros as Morgan Stanley cut its recommendation on the shares to “equal weight” from “overweight.” The brokerage said the company faces an increase in costs as it expands, while a slowdown in China is a “potential risk” to momentum.
Areva SA declined 3.2 percent 21.38 euros as the world’s largest builder of atomic plants said its FBFC International subsidiary may progressively close its nuclear fuel fabrication site in Dessel, Belgium, citing overcapacities on western European markets.
To contact the reporter on this story: Peter Levring in Copenhagen at Plevring1@bloomberg.net