European stocks advanced, extending this week’s gains, after U.S. jobless claims unexpectedly fell last week to the lowest since April 2008, indicating the recovery in the world’s largest economy is on track.
International Consolidated Airlines Group SA and Deutsche Lufthansa AG (LHA) climbed after the parent of British Airways reached a binding agreement to buy Lufthansa’s BMI unit. Deutsche Bank AG (DBK) and BNP Paribas (BNP) SA jumped more than 3 percent, as banks pared some of this year’s slump. Stagecoach Group Plc (SGC) slid 3.4 percent after JPMorgan Chase & Co. advised selling the shares.
The Stoxx Europe 600 Index added 1.1 percent to 239.78 at the close in London, bringing this week’s gains to 2.6 percent. The benchmark measure has rallied 12 percent from this year’s low on Sept. 22 amid optimism that U.S. economic growth is holding firm and euro-area leaders are moving to stem the region’s debt crisis.
“We’ve seen encouraging economic news out of the U.S.,” said Robert Talbut, who helps oversee about $70 billion as chief investment officer at Royal London Asset Management Ltd. “I still believe that the necessary shifts will occur in Europe and that in combination with more supportive moves elsewhere, 2012 can turn out to be a decent year for credit and equities.”
The Stoxx 600 index has still tumbled 13 percent this year as the crisis spread to Italy and Spain. Banks and commodity companies have posted the largest declines among 19 industry groups on the gauge, both slumping more than 30 percent.
U.S. jobless claims unexpectedly dropped last week to the lowest since April 2008, a sign that the U.S. labor market is strengthening. Jobless claims fell by 4,000 to 364,000 in the week ended Dec. 17, Labor Department figures showed today in Washington. The median forecast of 45 economists surveyed by Bloomberg News projected an increase to 380,000.
Another report showed American consumer confidence rose more than forecast in December, to a six-month high. The Thomson Reuters/University of Michigan final index of consumer sentiment climbed to 69.9 from 64.1 at the end of November. The median estimate in a Bloomberg News survey called for 68 after a preliminary reading of 67.7.
National benchmark indexes climbed in 15 of the 18 western- European (SXXP) stock markets. The U.K.’s FTSE 100 Index rose 1.3 percent, Germany’s DAX advanced 1.1 percent and France’s CAC 40 gained 1.4 percent.
U.K. GDP Growth
In the U.K., economic growth accelerated more than previously estimated in the third quarter in an increase that the Bank of England says is unlikely to be repeated as the euro- area debt crisis curbs bank lending and dents confidence. Gross domestic product rose 0.6 percent from the previous quarter, faster than the 0.5 percent previously estimated, the Office for National Statistics said today in London.
In the euro area, the rescue fund’s lending capacity would fall by around a third to 293 billion euros ($382 billion) if France’s top credit rating were cut and governments tried to retain the facility’s AAA grade without adding credit enhancements, Trevor Cullinan of Standard & Poor’s said.
The European Financial Stability Facility’s firepower of 440 billion euros stems from government guarantees that total almost twice the figure, giving the 17-nation fund a AAA rating that limits the cost of selling debt to finance emergency loans. France, one of six EFSF backers with the top grade, had its credit outlook lowered by Fitch Ratings last week.
The volume of shares changing hands across Europe has fallen this week as the Christmas holiday break approaches. Trading on the Stoxx 600 this week was 83 percent of the average for 2011, according to data compiled by Bloomberg.
IAG’s BMI Deal
IAG advanced 3.3 percent to 149.9 pence after agreeing to buy Lufthansa’s BMI unit in the U.K. for 172.5 million pounds ($270.5 million), fending off a counterbid from Virgin Atlantic Airways Ltd. IAG said the acquisition will boost its operating profit by 100 million euros in 2015. Lufthansa added 1.9 percent to 9.20 euros.
Deutsche Bank, Germany’s largest lender, rose 3.2 percent to 29.29 euros. BNP Paribas, France’s biggest, added 3.4 percent to 30.24 euros. A gauge of banks was the best performer among the 19 industry groups on the Stoxx 600, gaining 2 percent.
BHP Billiton Ltd (BHP), the world’s largest mining company, increased 1.9 percent to 1,870 pence as copper climbed on the London Metal Exchange.
Oil Companies Advance
A gauge of oil and gas companies rose 1.7 percent as crude oil posted a fourth day of gains. TGS Nopec Geophysical Co. ASA rallied 4.6 percent to 133 kroner. BP Plc advanced 2.5 percent to 450.3 pence.
RWE AG (RWE) gained 4.9 percent to 27.52 euros. The German city of Wiesbaden may buy a stake in Suewag Energie AG if RWE sells its holding in the energy company, Frankfurter Allgemeine Zeitung reported today, citing city officials.
Perform Group Plc rallied 5 percent to 210 pence after winning a four-year deal with the Women’s Tennis Association to manage all media rights from the beginning of 2013.
Stagecoach, the operator of Britain’s biggest rail-commuter franchise, retreated 3.4 percent to 260.9 pence after the shares were downgraded to “underweight” from “overweight” at JPMorgan by equity analyst David Pitura, who set the six-month target price at 280 pence.
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