European Stocks Advance as Banks Beat Analyst Estimates
European stocks advanced for the third time in four days after lenders including Credit Suisse Group AG (CSGN) reported profits that beat estimates, while minutes showed the Bank of England may reconsider the case for an interest-rate cut.
Credit Suisse, the second-biggest Swiss bank, jumped 4.5 percent after announcing a higher cost cutting-target and boosting capital. Bankia SA (BKIA) surged 14 percent after Economy Minister Luis de Guindos said Spain will block banks selling preferred stocks to retail investors. ASML Holding NV (ASML) was among the main gainers on a measure of technology stocks.
The Stoxx Europe 600 Index (SXXP) added 1.1 percent to 258.93 at the close of trade. Shares have climbed 11 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.
“We have a lot of monetary stimulus coming from others like the ECB and the Bank of England and even if the Fed doesn’t join in with QE3, the feeling is still that QE3 could be forthcoming, should the economy weaken,” Edmund Shing, an equity strategist at Barclays Capital, said, referring to a potential third round of quantitative easing by the Federal Reserve. “The hope is that the economy will improve and if that doesn’t happen there will be monetary stimulus.”
Fed Chairman Ben S. Bernanke delivered the second part of his semi-annual testimony on the economy and monetary policy to the House Financial Services Committee today. Bernanke yesterday outlined options to stimulate the U.S. economy should it fail to spur more jobs growth.
The Fed will release its Beige Book survey of business conditions in 12 U.S. districts today, two weeks before the Federal Open Market Committee meets to set monetary policy. The U.S. economy was described as growing at a “moderate pace” pace in the Fed’s June Beige Book survey.
Beginning construction of U.S. homes rose more than forecast in June to the fastest rate in almost four years, indicating a brighter outlook for the residential real estate market.
Housing starts rose 6.9 percent last month to a 760,000 annual pace after a revised 711,000 rate in May that was faster than initially estimated, the Commerce Department reported today in Washington. The median forecast of 79 economists surveyed by Bloomberg News called for a 745,000 rate. Building permits fell, reflecting a drop in applications for apartment construction.
In the U.K., minutes from the Bank of England’s recent July Monetary Policy meeting showed policy makers voted 7-2 to increase stimulus and said they may reconsider the case for an interest-rate cut after assessing the impact of new lending and liquidity measures on the economy.
U.K. Chancellor of the Exchequer George Osborne outlined plans to encourage as much as 51 billion pounds ($80 billion) of spending on infrastructure and exports in the latest effort pull the economy out of recession.
The Treasury will operate a 40 billion-pound loan-guarantee program to underwrite a share of projects that face financing difficulties and are ready to begin in the next 12 months. It will also provide 6 billion pounds in loans to 30 public-private partnership projects and a further 5 billion pounds of export guarantees for infrastructure and manufacturing companies.
U.K. unemployment fell to a nine-month low in the quarter through May as the London Olympics helped to create jobs, underlining the resilience of the labor market in the face of a recession and Europe’s debt crisis. Unemployment based on International Labour Organization methods fell to 8.1 percent of the workforce from 8.2 percent in the period through April, the Office for National Statistics said today in London.
National benchmark indexes rose in all western European markets except Finland and Iceland. The U.K.’s FTSE 100 gained 1 percent. France’s CAC 40 climbed 1.8 percent and Germany’s DAX advanced 1.6 percent.
Credit Suisse advanced 4.5 percent to 17.91 Swiss francs. The bank announced measures to cut costs and boost capital by 8.7 billion francs ($8.9 billion) after a central bank report last month called for an increase in equity. The cost savings target was increased to 3 billion francs from 2 billion francs, the bank said.
Second-quarter net income rose to 788 million francs from 768 million a year earlier, the Zurich-based bank said.
Bankia, the part government-controlled Spanish lender, jumped 14 percent to 60.5 euro cents, reversing an earlier decline of as much as 9.3 percent. Spain will introduce legislation to prevent banks miss-selling preferred stock to retail investors after savers lost money on the securities.
“What we are going to do is modify the legislation to prevent this happening again,” De Guindos said during a debate in parliament today. “Unfortunately, the changes won’t have a retroactive effect.”
ASML paced gains among European technology companies, rising 6.8 percent to 44.23 euros, as Chief Executive Officer Eric Meurice said on a conference call that he expects a “steady increase in profitability,” even as the producer of machines for chipmakers joined Applied Materials Inc. and Intel Corp. in predicted a weaker chip market.
Second-half net sales will be in a range of 2.2 billion euros ($2.7 billion) to 2.4 billion euros, the Veldhoven, Netherlands-based company said today. That compared with an average 2.45 billion-euro estimate of analysts in a Bloomberg survey and the 2.67 billion-euro revenue reported a year earlier. Second-quarter net bookings topped estimates.
Nordea (NDA) rose 2.4 percent to 62.05 kronor after saying second-quarter profit jumped 17 percent as an increase in lending income outweighed higher loan losses. Net income rose to 820 million euros from 698 million euros a year earlier, the Stockholm-based lender said in a statement. That beat the 722 million-euro average estimate of 14 analysts surveyed by Bloomberg.
Ericsson AB rose 2.2 percent to 60.20 kronor, reversing an earlier decline of as much as 5.1 percent. The biggest maker of mobile network equipment reported second-quarter profit that missed analysts’ estimates as wireless carriers curbed spending to cope with a slowing global economy. Net income fell 64 percent to 1.11 billion kronor ($158 million), Stockholm-based Ericsson (ERICB) said today in a statement. Analysts had predicted 1.64 billion kronor, according to the average of estimates compiled by Bloomberg.
Puma SE (PUM) plunged 4.8 percent to 214.65 euros after Europe’s second-largest sporting-goods maker cut its forecasts for sales and profit growth in 2012 as business slowed in the first half of the year. Net income will fall “significantly” from last year’s 230.1 million euros because of a 100 million-euro charge for speeding up and expanding the scope of the company’ transformation program, Puma said in a statement today.
Waertsila Oyj (WRT1V), the world’s biggest maker of ship motors and power plants, fell 8.1 percent to 24.82 euros. The company said customers postponed deliveries during the second quarter amid a shaky global economy.
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