European Stocks Gain for 10th Week on Earnings, Stimulus
European stocks rose for a 10th week, extending the longest streak since January 2006, as companies reported better-than-expected earnings and speculation grew policy makers will do more to stimulate the economy.
Bankia SA, the lender bailed out by the Spanish state, posted the biggest gain in the Stoxx Europe 600 Index for a second week. Danske Bank A/S (DANSKE) and Aegon NV (AGN) each surged 11 percent as profit beat estimates. Standard Chartered Plc tumbled 15 percent after U.S. regulators alleged it processed $250 billion of deals with Iranian banks subject to sanctions.
The Stoxx 600 increased 1.6 percent to 269.88 this past week, even after falling 0.1 percent yesterday. The benchmark gauge has climbed 15 percent since June 4 as euro-area policy makers eased repayment terms for Spanish banks and optimism grew that central banks will introduce new stimulus measures.
“The earnings season hasn’t come in as bad as expected,” said Thomas Tilse, who helps manage $6.2 billion as head of global portfolio strategy at Allianz Global Investors in Frankfurt. “On the liquidity side, basically the market has the assumption that the Fed as well as the ECB and the Bank of England will be in coordinated action in loosening monetary policy further.”
European Central Bank President Mario Draghi said Aug. 2 that the bank may take action to reduce debt yields for nations on Europe’s periphery, while stressing that the ECB must work “within its mandate to maintain price stability.” German Chancellor Angela Merkel is “not worried” by Draghi’s announcement, spokesman Georg Streiter told reporters in Berlin on Aug. 6 when asked whether the government is concerned that ECB independence might be compromised.
Italy’s Prime Minister Mario Monti warned of a potential breakup of the euro region without greater urgency in efforts to lower government borrowing costs. In an interview with Germany’s Der Spiegel magazine published Aug. 5, he said that disagreements within the 17-nation euro area are detracting from the policy response to the debt crisis.
Of the 247 companies listed on the Stoxx 600 that have reported quarterly profit this earnings season, 124 have exceeded analysts’ projections, while 121 have missed them, according to data compiled by Bloomberg.
National benchmark indexes rose in all of the 18 western European markets, except Sweden. The U.K.’s FTSE 100 (UKX) advanced 1 percent, while Germany’s DAX Index jumped 1.2 percent. France’s CAC 40 gained 1.8 percent.
Bankia jumped 31 percent. The shares have more than doubled from this year’s low on July 17.
Mediobanca SpA, Italy’s biggest publicly traded investment bank, added 11 percent. Credit Agricole SA rose 12 percent. France’s third-biggest bank received bids from Greece’s biggest lenders for its unprofitable Emporiki Bank unit, moving the French company closer to an exit from Greece.
Danske Bank gained 11 percent, the most since September. Denmark’s largest lender said second-quarter profit surged 27 percent to 1.5 billion kroner ($250 million), exceeding estimates in a Bloomberg survey by the most since the first quarter of 2010.
Aegon rallied 11 percent. The Dutch owner of U.S. insurer Transamerica Corp. posted second-quarter net income of 254 million euros ($313 million), topping the average estimate of 88.5 million euros in a Bloomberg survey of 12 analysts. Underlying earnings, which exclude investment swings, rose 10 percent to 443 million euros.
Schibsted ASA, (SCH) Norway’s largest media group, gained 7.5 percent as its second-quarter results matched analysts’ estimates and the company announced a cost-cutting program.
ThyssenKrupp AG rose 9.7 percent. Germany’s biggest steelmaker said adjusted earnings before interest and taxes, the profit gauge used by ThyssenKrupp to forecast future results, fell 79 percent to 122 million euros in the fiscal third-quarter as losses from the Steel Americas unit widened. That still beat the 83.4 million-euro average of 12 analyst estimates compiled by Bloomberg.
A gauge of mining companies was the best performer among the 19 industry groups in the Stoxx 600, advancing 6.2 percent.
Rio Tinto Group (RIO) advanced 5.9 percent, the most since January. The world’s third-largest mining company reported first-half profit of $5.9 billion from $7.6 billion a year earlier. That compared with the $5.04 billion average of 11 analyst estimates compiled by Bloomberg.
Randgold Resources Ltd. (RRS) surged 9.7 percent. The miner of precious metals in Africa said second-quarter profit rose 3.7 percent to $117.5 million after gold output increased to 210,534 ounces. The company is on schedule to meet the mid-range of its 825,000-to-865,000-ounce full-year target and forecasts possible acquisitions of gold explorers in Africa, Chief Executive Officer Mark Bristow said.
Evraz Plc (EVR), a miner of iron ore and coal, increased 13 percent. UBS AG analysts removed the company from their list of least preferred shares.
Tod’s SpA (TOD), the Italian maker of pink alligator loafers, gained 10 percent as its first-half revenue of 482.5 million euros beat estimates of 476.4 million euros.
Nokia Oyj rallied 18 percent. The smartphone maker that started using Microsoft Corp. operating systems to revive its business agreed to sell its Qt app-tools unit to Digia Oyj as it stops developing home-grown software. Nokia plans to announce its new line of smartphones using the Windows Phone 8 operating system as early as next month and offer them for sale before the year-end holiday shopping season, a person with knowledge of the matter said this month.
Mapfre SA (MAP) rose 18 percent, the biggest jump since 1998. The Spanish insurer was raised to overweight, meaning investors should buy the shares, from equal weight at Morgan Stanley, which said downside risks for the stock are more than priced in.
Standard Chartered tumbled 15 percent, the most since 2009, after New York regulator Benjamin Lawsky threatened to strip the London-based bank of its license to operate in the state, alleging it processed deals with Iranian banks subject to sanctions.
Amadeus IT Holding SA fell 8.6 percent after Iberia Lineas Aereas de Espana SA hedged its entire stake in the Spanish operator of airline bookings systems after a rally this year.
Securitas AB (SECUB), the world’s second-biggest guarding-services company, sank 8 percent after reporting second-quarter net income of 337 million kronor ($50 million), trailing the average analyst estimate of 422 million kronor.
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