European Stocks Climb, Posting Best Start to a Year Since 1998

European stocks rose, posting their best monthly start to a year since 1998, as most countries in the region agreed to tighter budget controls, outweighing worse- than-estimated U.S. economic data.

BP Plc and Royal Dutch Shell Plc tracked gains in crude prices. ThyssenKrupp AG (TKA) added 2.7 percent after selling its stainless steel unit to Outokumpu Oyj. ARM Holdings Plc (ARM) jumped 2 percent after fourth-quarter revenue topped estimates. European Aeronautic Defence & Space Co. climbed after UBS AG advised buying the shares.

The Stoxx Europe 600 Index rose 0.8 percent to 254.41 at the close in London, rebounding from two days of declines. The benchmark gauge rallied 4 percent this month, the biggest January gain since 1998.

“Markets are in a risk-on mood and may just continue rising when events, such as the summit, reveal no new risks,” said Alexander Kraemer, a cross-asset strategist at Commerzbank AG in Frankfurt. “European leaders may have learned they have to address problems and cannot put their head in the sand and hope problems go away.”

European Union leaders, meeting in Brussels yesterday, agreed on a fiscal-discipline treaty that allows for sanctions on high-deficit states and requires members to enact laws to limit budget shortfalls. Britain and the the Czech Republic refused to sign the pact.

The policy makers also decided to bring the region’s permanent bailout fund, the European Stability Mechanism, into operation on July 1, a year before schedule.

U.S. Consumer Confidence

A report showed confidence among U.S. consumers unexpectedly dropped in January. The Conference Board’s confidence index fell to 61.1 from a revised 64.8 reading in the prior month, figures from the New York-based private research group showed today. The median forecast of economists surveyed by Bloomberg News called for a rise to 68.

U.S. business activity expanded less than forecast in January. The Institute for Supply Management-Chicago Inc. business barometer decreased to 60.2 from 62.2 in December. Readings above 50 signal growth. Economists forecast the gauge would rise to 63, according to the median of 57 estimates in a Bloomberg survey. Projections ranged from 59 to 67.

The Stoxx 600 rallied 20 percent from its most-recent low on Sept. 22 through Jan. 26, entering a bull market as per the common definition by analysts, as the U.S. economy maintained its recovery and speculation grew that the euro area will contain its sovereign-debt crisis.

National benchmark indexes rose in 15 of the 18 western European markets today. The U.K.’s FTSE 100 climbed 0.2 percent, Germany’s DAX advanced 0.2 percent, and France’s CAC 40 gained 1 percent.

Greek Debt Talks

Greece aims to complete debt-swap talks with bondholders this week. Prime Minister Lucas Papademos told reporters after summit that he is “strongly committed” to reaching a deal.

German unemployment dropped more than economists forecast to a two-decade low in January. The number of people out of work fell a seasonally adjusted 34,000 to 2.85 million, the Federal Labor Agency said. That’s the biggest drop since March. Economists had forecast a decline of 10,000, the median of 32 estimates in a Bloomberg News survey. The adjusted jobless rate slipped to 6.7 percent from 6.8 percent.

Portugal’s Debt

Portuguese borrowing costs declined from a euro-era high after Prime Minister Pedro Passos Coelho said his country’s debt has been judged “perfectly sustainable” by the EU and International Monetary Fund and that there is no risk of writedowns on the bonds.

BP, Europe’s second-largest oil producer, gained 2.7 percent to 470.85 pence. Shell and Total SA gained 0.5 percent to 2,240.5 pence and 1.5 percent to 40.41 euros, respectively.

Oil gained after the December industrial output rose more than forecast in Japan, the third-biggest crude consumer.

ThyssenKrupp, Germany’s largest steelmaker, rose 2.7 percent to 21.67 euros in Frankfurt after agreeing to sell its Inoxum stainless steel unit to Outokumpu Oyj. (OUT1V) The deal valued the German company’s unit at about 2.7 billion euros.

ThyssenKrupp will retain a 29.9 percent stake in the business, receive 1 billion euros in cash, and transfer liabilities of 422 million euros for Inoxum to Outokumpu.

Outokumpu fell 15 percent to 6.27 euros in Helsinki.

ARM Holdings, EADS

ARM Holdings jumped 2 percent to 609.5 pence. The maker of processors for Apple Inc.’s iPads and iPhones said fourth- quarter revenue climbed 21 percent as the company increased the number of licenses sold for smartphones and tablet computers.

EADS, which makes Airbus and eurofighter jets, advanced 1.2 percent to 25.68 euros after UBS raised its recommendation on the shares to “buy” from “neutral.”

British Sky Broadcasting Group Plc (BSY) gained 3.7 percent to 690 pence after first-half operating profit rose 16 percent, topping analysts’ estimates, as the U.K.’s biggest pay-TV broadcaster sold more broadband products to its subscribers.

Repsol YPF SA (REP), the biggest oil company in Spain, fell 2.4 percent to 21 euros in Madrid after Pagina/12 newspaper said Argentine officials had discussed a takeover of its YPF unit, the South American country’s biggest oil producer, without saying where it obtained the information.

Vestas Wind Systems A/S (VWS), the world’s biggest maker of wind turbines, climbed 3.5 percent to 64.10 kroner after winning its first order in China for a turbine that operates at low wind speeds.

To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net

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

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