European stocks rallied the most this year as demand increased at a Spanish debt sale, German investor confidence topped forecasts and the International Monetary Fund boosted its global growth outlook.
Banks contributed the most to the Stoxx Europe 600 Index’s advance as Banco Popolare SC (BP) and Barclays Plc (BARC) climbed. Danone rose 2.9 percent as the world’s biggest yogurt maker reported higher first-quarter sales. Repsol YPF SA (REP) plunged 6.1 percent as Argentina took control of the Spanish company’s YPF unit following a dispute over slumping oil output and investments.
The Stoxx 600 gained 2 percent to 259.45 at the close of trading, the biggest jump since Dec. 20. The benchmark index has climbed 6.1 percent this year as the European Central Bank flooded financial markets with 1 trillion euros ($1.3 trillion) of cheap loans for three years to ease credit. ECB Governing Council member Ewald Nowotny said late yesterday that he doesn’t see an “immediate need” for an extension of the measures, known as the longer-term refinancing operation, or LTRO.
“The Spanish debt auction today shows there is still liquidity in the market,” said Witold Bahrke, a senior strategist at PFA Pension A/S in Copenhagen, where he helps oversee $55 billion. “We’ve cleared some smaller tests on sentiment surrounding the euro area ahead of the real tests late in the week when France and Spain sells debt maturing later than the LTRO’s.”
National benchmark indexes advanced in all of the 18 western European markets. France’s CAC 40 and Germany’s DAX rose 2.7 percent while the U.K.’s FTSE 100 (UKX) added 1.8 percent.
Spain sold 3.18 billion euros of bills today, compared with a maximum target of 3 billion euros the Treasury set for the sale. The average 12-month yield was 2.623 percent, compared with 1.418 percent at the last auction on March 20, the Bank of Spain said. The Treasury also sold 18-month bills at 3.11 percent, compared with 1.71 percent last month.
Demand for the 12-month bills was 2.9 times the amount sold, compared with 2.14 times last month. Demand for the longer maturity notes rose to 3.77 times from 2.93. Spain will sell 10- year bonds on April 19 and France will auction securities maturing between 2014 and 2018.
German investor confidence unexpectedly rose for a fifth month in April to the highest in almost two years, suggesting Europe’s largest economy can weather the resurgent debt crisis in the euro region’s periphery. The ZEW Center for European Economic Research’s index of investor and analyst expectations, which aims to predict economic developments six months in advance, climbed to 23.4 from 22.3 in March.
“Better-than-expected reports are allowing for a reduction in some of the macro risk we’ve seen over the last couple of sessions, and will give room to shareholders to focus on the strong micro fundamentals,” said Henk Potts, an equity strategist at Barclays Wealth in London, which oversees $239 billion.
The world economy will expand 3.5 percent this year and 4.1 percent in 2013, the Washington-based IMF said today in its World Economic Outlook, raising forecasts made in January from 3.3 percent for 2012 and 4 percent for next year.
A gauge of bank shares gained 4 percent today as Banco Popolare, Italy’s fifth-largest lender, increased 9.3 percent to 1.16 euros. Barclays, the U.K.’s second-biggest bank by assets, increased 4.6 percent to 220.55 pence. BNP Paribas SA (BNP), France’s largest bank, rallied 6.9 percent to 30.99 euros and Societe Generale SA (GLE), the country’s second-biggest lender, rose 8.6 percent to 18.57 euros.
Greek banks jumped amid optimism the government is close to completing its plans to restructure the country’s banks. Prime Minister Lucas Papademos has said terms of bank recapitalizations must be agreed upon before national elections are held on May 6. EFG Eurobank Ergasias SA (EUROB) surged 7.3 percent to 71.9 euro cents and Alpha Bank SA climbed 6.2 percent to 1.20 euros.
“Volatility remains high as there is a lot of speculation about the recapitalization terms, while the involved parties are looking for ways to reduce the eventual recapitalization needs,” Panagiotis Kladis, an analyst at Athens-based National Securities, said in a note to clients today.
Danone (BN) advanced 2.9 percent to 53.08 euros after reporting higher first-quarter sales, led by bottled water and baby food. Revenue rose to 5.12 billion euros from 4.76 billion euros a year earlier, the company said. That beat the 5.05 billion-euro average estimate of 11 analysts surveyed by Bloomberg.
Sky Soccer Rights
Sky Deutschland AG (SKYD) gained 7 percent to 2.15 euros. The broadcaster beat rivals in an auction of broadcasting rights for Germany’s Bundesliga soccer matches, expanding its license to show the country’s most watched sports through 2017.
Afren Plc (AFR) surged 6.3 percent to 143 pence as the company reported a “significant” oil discovery in the Kurdistan region of Iraq. The Simrit-2 exploration well encountered an estimated 409 meters of net oil pay.
Aker Solutions ASA (AKSO), Norway’s biggest maker of oil platforms, jumped 7.4 percent to 96.40 kroner. The company won a $1.9 billion rig contract from Statoil ASA.
Repsol, Spain’s largest oil company, plunged 6.1 percent to 16.42 euros. The Spanish government pledged to take “decisive” action against Argentina within days, after President Cristina Fernandez de Kirchner seized YPF, the Argentine oil company majority-owned by Repsol. Fernandez took control of Argentina’s largest crude producer late yesterday, replacing Chief Executive Officer Sebastian Eskenazi with Planning Minister Julio De Vido.
Marks & Spencer Group Plc (MKS) slid 2.5 percent to 358.7 pence. The U.K.’s largest clothing retailer said sales of general merchandise at U.K. stores open at least a year fell 2.8 percent in the 13 weeks ended March 31. The average estimate of 10 analysts was for an unchanged performance.
Burberry Group Plc (BRBY) sank 5.9 percent to 1,492 pence, the largest drop since October. The U.K.’s largest luxury-goods maker reported fiscal fourth-quarter sales that trailed analysts’ estimates and said it remains vigilant as Europe’s economy slows.
Wincor Nixdorf AG (WIN) lost 10 percent to 30.36 euros, for the worst performance in the Stoxx 600. (SXXP) The maker of banking machines and cash registers said that it sees “significant” reduction in full-year operating profit, citing a “continued and substantial” decline in banking sales and pressure on margins in hardware.
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