European Stocks Rise for Sixth Straight Week; Aegis Jumps
European stocks climbed for a sixth straight week, the longest winning streak in more than two years, amid speculation that central bank policy makers will add to stimulus measures to support the economy.
Aegis Group Plc (AGS) soared 45 percent for the biggest advance in 19 years after Dentsu Inc. agreed to buy the advertising company. Temenos Group AG sank 26 percent as the Swiss maker of banking software cut its sale forecast and Chief Executive Officer Guy Dubois quit.
The Stoxx Europe 600 Index climbed 0.7 percent to 256.26 this week, for the longest stretch of gains since April 2010. The measure has rallied 9.6 percent from this year’s low on June 4 as the European Central Bank and People’s Bank of China cut their benchmark interest rates and euro-area leaders eased repayment rules for Spanish banks and relaxed conditions for possible aid to Italy.
“We expect the European Central Bank to cut interest rates again and globally interest rates are being lowered to restart the economy,” said Pierre Mouton, a fund manager who helps oversee $6.5 billion at Notz Stucki & Cie. in Geneva. “European policy makers have made a strong commitment vis-a-vis banks. That eliminates systemic risk for the euro zone and makes investors more optimistic.”
China’s growth slowed for a sixth quarter to the weakest pace since the global financial crisis, putting pressure on Premier Wen Jiabao to boost stimulus to secure a second-half economic rebound.
Gross domestic product expanded 7.6 percent last quarter from a year earlier, the National Bureau of Statistics said yesterday. The pace, a three-year low, compared with an 8.1 percent gain in the previous period and the 7.7 percent median forecast of economists.
In the U.S., Federal Reserve officials debated the need for further stimulus measures at last month’s meeting, minutes released on July 11 showed. Two participants supported additional bond purchases, while two others said only a further deterioration in the economy would warrant them.
The Federal Open Market Committee said on June 20 it will expand Operation Twist to extend the maturities of assets on its balance sheet, and it stands ready to take further action as needed.
Applications for U.S. jobless benefits decreased by 26,000 in the week ended July 7 to 350,000, the fewest since March 2008, Labor Department figures showed on July 12. Economists had forecast 372,000 claims, according to the median estimate in a Bloomberg survey.
ASML Holding NV is due to become the first member of the Euro Stoxx 50 Index (SX5E) to report earnings this quarter when Europe’s biggest maker of semiconductor equipment releases results on July 18. The shares gained 2.7 percent this week as Intel Corp. said it will invest as much as $4.1 billion in the Dutch company.
Companies in the Stoxx 600 (SXXP) will earn 23.93 euros a share in fiscal 2012, according to analyst estimates compiled by Bloomberg. The projections have been cut from more than 25 euros a share at the start of the year, the data show.
“Earnings season is going to be very complicated,” said Bruno Ducros, a fund manager at CamGestion in Paris, which oversees about $2 billion in stocks. “So far there have been a number of profit warnings.”
European stock strategists are backing away from their most-pessimistic forecasts. While sticking to predictions for losses of as much as 16 percent, Morgan Stanley’s Ronan Carr raised his recommendation on European equities to neutral on July 2 and Alain Bokobza of Societe Generale SA said he has started to reduce the underweight call he’s had for at least two years. Exane BNP Paribas said investors can find bargains among companies most reliant on economic growth.
Aegis surged 45 percent as Dentsu, the 111-year-old Japanese advertising company, agreed to buy the U.K. company in a 3.16 billion-pound ($4.9 billion) deal. Aegis pushed an index of media shares in the Stoxx 600 to the biggest gain of the year, with a 3.5 percent advance.
Vivendi SA jumped 7.9 percent. Chairman Jean-Rene Fourtou said that the company may sell its $8.1 billion stake in Activision Blizzard Inc., the largest U.S. video-game publisher.
Afren Plc, a U.K.-based oil and gas company focused on Nigeria and Iraq, climbed 8.4 percent. Exxon Mobil Corp. and Eni SpA are examining possible bids for Afren, the U.K.’s Daily Mail said on July 9. Either one could offer at least 200 pence a share, the newspaper reported, without saying where it got the information. An official at Eni, who asked not to be identified citing company policy, declined to comment. Patrick McGinn, a spokesman for Exxon, also declined to comment.
ThyssenKrupp AG, Germany’s largest steelmaker, advanced 11 percent. Macquarie Group Ltd. raised its recommendation on the shares to outperform, the equivalent of buy, from neutral, saying that the sale of its Steel Americas plants could “unlock substantial value.”
Temenos, the banking-software maker that retreated from a bid to buy Misys Plc, sank 26 percent. The company said CEO Dubois quit and cut the upper end of its sales-growth forecast to 1 percent from 6 percent for the full year.
Britvic Plc (BVIC), the maker of Robinsons fruit drinks, tumbled 9.9 percent. The company said full-year results will be “at the bottom end” of analysts’ estimates and a recall of its Fruit Shoot products will hurt earnings further.
Spanish banks fell, led by Bankia SA (BKIA), which dropped 23 percent. Banco Popular Espanol SA slid 5.2 percent.
Spanish lenders’ net borrowings from the ECB jumped to a record 337 billion euros ($411 billion) in June as the European bailout agreement for the nation’s lenders didn’t ease their access to funding.
Net average ECB borrowings climbed from 288 billion euros in May, the Bank of Spain said on its website July 13. Gross borrowing was 365 billion euros, up from 325 billion euros in May, and accounting for 30 percent of gross borrowing in the whole euro region.
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