European Stocks Rebound From Biggest Decline in a Month
European stocks rebounded from the biggest drop in a month amid concern recent losses are overdone considering the outlook for company earnings.
KBC Groep NV (KBC), Belgium’s biggest bank and insurer, and ING Groep NV (INGA), the largest Dutch financial-services company, each gained more than 2 percent. EON AG and RWE AG (RWE) rose after Commerzbank AG upgraded its recommendations on Germany’s biggest utilities. Cable & Wireless Communications Plc (CWC) surged 18 percent after reporting earnings that beat estimates.
The Stoxx Europe 600 Index (SXXP) rose 1 percent to 241.91 at the close of trading. The benchmark gauge had retreated for three straight weeks, driving its valuation to 9.9 times estimated earnings, near the cheapest since January, according to data compiled by Bloomberg.
“There are definitely long-term investors, that look beyond whatever happens in the next 1-2 years, who are in the market to buy on historically attractive valuations,” said Henrik Drusebjerg, a senior strategist at Nordea Bank AB in Copenhagen, where he helps oversee $230 billion. “We’re allocating considerable funds to defensive stocks to stay in while avoiding the biggest downside risks.”
European stocks slid the most in a month yesterday after a report cited Greece’s former Prime Minister Lucas Papademos as saying that while it is unlikely the nation will leave the euro, it’s still a risk.
National benchmark indexes rose in all the western European markets today, except for Iceland and Greece. The U.K.’s FTSE 100 rallied 1.6 percent, Germany’s DAX advanced 0.5 percent and France’s CAC 40 gained 1.2 percent. The Greek ASE Index plunged 4.5 percent to the lowest level since January 1990.
The volume of shares changing hands in Stoxx 600 companies was 1 percent above the average over the past 30 days, according to data compiled by Bloomberg.
“There is already a lot of bad news priced in,” Robert Buckland, Citigroup Inc.’s chief global equity strategist, wrote in a report dated yesterday. “While it looks like it’s going to be another difficult summer for global equity markets, our targets are now suggesting 20 percent upside by end-2012. We would buy into weakness.”
Stocks rose today even as a report showed European services and manufacturing output contracted more than economists forecast in May. A composite index based on a survey of purchasing managers in both industries fell to 45.9 from 46.7 in April, London-based Markit Economics said. Economists had forecast a drop to 46.6, the median of 14 estimates in a Bloomberg survey showed. A reading below 50 indicates contraction.
German business confidence also declined more than forecast in May. The Munich-based Ifo institute said today its business- climate index, based on a survey of 7,000 executives, slipped to 106.9 from 109.9 in April. Economists had forecast a reading of 109.4, according to the median of 37 estimates in a Bloomberg survey.
European leaders clashed at a meeting yesterday over joint debt sales as they called on Greece to stick with the budget cuts needed to stay in the euro. The gathering was marked by new French President Francois Hollande’s challenge to the German- dominated deficit-cutting orthodoxy that has failed to stabilize the euro area and led to speculation that Greece might be forced out.
In the U.S., Labor Department figures showed the number of Americans filing first-time claims for unemployment insurance payments was little changed last week. Applications for jobless benefits decreased by 2,000 to 370,000 in the week ended May 19 from a revised 372,000 the prior week. Initial claims matched the median estimate in a Bloomberg News survey of economists.
A separate report showed orders for computers, machinery and other capital equipment dropped in April for a second month, pointing to a slowdown in U.S. business investment.
Bookings for non-military goods excluding aircraft decreased 1.9 percent after falling 2.2 percent in March, the first back-to-back decline in a year, data from the Commerce Department showed today in Washington. Demand for all durable goods, those meant to last at least three years, rose 0.2 percent, matching the median forecast of economists surveyed by Bloomberg News.
KBC jumped 3 percent to 12.49, while ING added 2.1 percent to 4.81 euros. A gauge of bank stocks was the fourth-best performer of the 19 industry groups in the Stoxx 600.
Banco Bilbao Vizcaya Argentaria SA (BBVA) rose 2.5 percent to 4.93 euros. Spain’s second-largest lender will take non-binding bids for five portfolios of homes, non-performing loans and consumer loans until May 29, two people with knowledge of the matter said. A spokesman for BBVA declined to comment or disclose the nominal value of the portfolios.
EON and RWE climbed 2.1 percent to 15.31 euros and 2.2 percent to 29.99 euros, respectively. Commerzbank raised its recommendation on EON to buy from hold and on RWE to hold from reduce.
Cable & Wireless Communications jumped 18 percent to 33.01 pence, the biggest gain since 2003. The U.K. based mobile-phone network operator reported earnings before interest, taxes, depreciation and amortization of $901 million, beating analysts’ estimates of $884.5 million, and said it expects similar levels through 2012 and 2013.
Sonova Holdings AG (SOON), the Swiss owner of the Phonak hearing aid brand, rose 3.3 percent to 86.80 Swiss francs after HSBC Holdings Plc analyst Jan Keppeler advised clients to buy shares in the company.
Bankia SA (BKIA), the listed unit of BFA Bankia, dropped 7.4 percent to 1.57 euros, after Spain’s economy minister Luis de Guindos said the government will recapitalize the parent with as much public money as necessary, as the nationalized group needs at least 9 billion euros ($11 billion) to comply with banking rules.
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