European Stocks Advance After Elections in France, Greece
European stocks rose the most in more than a week as German Chancellor Angela Merkel said she will receive French president-elect Francois Hollande with “open arms” as they work together to tackle the debt crisis.
France’s BNP Paribas SA (BNP) and Societe Generale SA (GLE) erased earlier losses. Italian banks rallied as UBS AG recommended UniCredit SpA (UCG) and Intesa Sanpaolo SpA. (ISP) CSM (CSM) NV jumped 19 percent after saying it will sell its U.S. and European bakery-supply units. Greece’s ASE Index (ASE) plunged the most since November as voters switched to anti-austerity parties in yesterday’s election, boosting concern the nation will default.
The Stoxx Europe 600 Index (SXXP) rose 0.7 percent to 254.83 at the close of trading, erasing an earlier decline of as much as 0.8 percent as a report showed German factory orders topped forecasts. Today’s gain was the biggest since April 27 and takes this year’s advance to 4.2 percent.
“Since last week it has been obvious to most people that Hollande would defeat Sarkozy, but what we need to see is how he’ll work together with Merkel and what that will mean for the euro zone,” Alexander Kraemer, a strategist at Commerzbank AG, said in a phone interview from Frankfurt. “The question will be how any new growth initiatives will be implemented. Will it be spurred by new government spending, being the absolute opposite of austerity measures, or will it be achieved through liberating the labor market.”
National benchmark indexes rose in 12 of the 16 western European markets open today. Spain’s IBEX 35 (IBEX) jumped 2.7 percent and Italy’s FTSE MIB rallied 2.6 percent. Germany’s DAX added 0.1 percent and France’s CAC 40 increased 1.7 percent, while Greece’s ASE plunged 6.7 percent.
U.K. and Irish markets were closed for a holiday.
Hollande defeated French President Nicolas Sarkozy to become the first Socialist in 17 years to control Europe’s second-biggest economy. He pledged to push for less austerity and more growth in the region.
Merkel said she will welcome Hollande in Germany with “open arms,” while rejecting government stimulus as the way to spur economic growth in Europe.
“This discussion is not whether we should pursue consolidation or growth, it’s completely clear that we need both,” Merkel told reporters in Berlin today. “Rather, I think the core of the discussion is whether we again need debt- financed economic programs, or whether we need growth elements that are sustainable and oriented toward the economic strength of certain countries.”
BNP Paribas and Societe Generale, the biggest French lenders, gained 4.2 percent to 30.21 euros and 4 percent 17.99 euros, respectively, erasing earlier losses. The spread between German 10-year government bond yields and French yields on similar-maturity debt narrowed.
UniCredit and Intesa Sanpaolo rose 5.6 percent to 2.85 euros and 3.9 percent to 1.09 euros, respectively, as UBS kept its positive view of the lenders among Italian banks.
CSM, the world’s biggest maker of bakery ingredients, jumped 19 percent to 12.94 euros, the biggest gain since at least 1989, as the company said it will sell U.S. and European bakery-supply units to fund the Purac and Caravan bio-based ingredients brands’ growth.
Lafarge, Air France
Lafarge SA (LG), the world’s biggest cement maker, increased 4 percent to 30.50 euros. Analysts at Citigroup Inc., Helvea AG and Equita SIM SpA upgraded the shares.
Air France-KLM Group (AF) rallied 6.6 percent to 3.71 euros, the highest in almost three weeks. Credit Suisse Group AG raised the stock to neutral from underperform.
German factory orders rose more than forecast in March as demand from outside the euro area helped Europe’s largest economy weather the debt crisis. Orders, adjusted for seasonal swings and inflation, jumped 2.2 percent from February, when they gained a revised 0.6 percent, the Economy Ministry in Berlin said. Economists surveyed by Bloomberg had predicted a 0.5 percent increase, according to the median of 37 estimates.
National Bank of Greece plummeted 8.3 percent to 1.55 euros while Alpha Bank SA dropped 19 percent to 84 euro cents. Public Power Corp., Greece’s biggest electricity company, retreated 14 percent to 2.14 euros.
Greece’s political leaders struggled to find the support needed to form a coalition government after voters flocked to anti-bailout parties, calling into question the country’s ability to impose the measures needed to guarantee its future in the euro.
New Democracy won 19 percent of the total vote and 108 seats in the 300-seat parliament. Pasok, the Socialist party that partnered with New Democracy in securing a second rescue package for the country, trailed in third place with 13 percent and 41 seats.
Under the terms of the 130 billion-euro ($169 billion) bailout from the European Union and International Monetary Fund, international lenders expect to hear in June how Greece will achieve 11.6 billion euros of savings for 2013 and 2014. Citigroup Inc. economists said the risk of Greece leaving the euro has risen to as much as 75 percent from 50 percent before the election.
Should New Democracy leader Antonis Samaras fail to form a government, the onus will fall to Syriza, a coalition of left- wing parties that has vowed to cancel the bailout terms.
“The stock market is responding negatively to the election result,” said Frank Velling, the chief strategist at BankInvest Asset Management A/S in Copenhagen, which manages $17 billion. “The political situation in Greece must be settled quickly as a new budget plan must be in place by June to secure more economic aid.”
Roche Holding AG (ROG) fell the most since November after abandoning development of an experimental cholesterol drug. The biggest maker of cancer drugs dropped 3.5 percent to 159.40 Swiss francs after an independent group of experts recommended stopping the study of the experimental cholesterol drug dalcetrapib “due to a lack of clinically meaningful efficacy.”
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