Europe Stocks Rally for Second Week on QE3, German Ruling
European stocks posted a second week of gains as the Federal Reserve announced a third round of quantitative easing and Germany’s highest constitutional court cleared the way for the euro-area’s permanent bailout fund.
Carmakers and mining companies led the rally as U.S. officials also raised their outlook for the world’s largest economy. Peugeot SA advanced 9.5 percent, while Kazakhmys Plc (KAZ) jumped 18 percent. Commerzbank AG (CBK) and Royal Bank of Scotland Plc climbed more than 14 percent. European Aeronautic, Defence & Space Co. slid 15 percent after announcing talks for a potential merger with BAE Systems Plc. (BA/)
The benchmark Stoxx Europe 600 Index gained 1.3 percent to 275.95 this week, reaching the highest daily close since June 1, 2011. The gauge has surged 18 percent from this year’s low on June 4 amid speculation central banks around the world would take further measures to support an economic recovery.
“The latest news from Germany and the U.S. has reduced uncertainty, positively impacting risk assets,” said Stefan Angele, head of investment management at Swiss & Global Asset Management in Zurich. “The game changer, referring to QE3, is the unlimited intervention and the fact that they link the action to the future economic developments.”
Fed Chairman Ben S. Bernanke said on Sept. 13 that the central bank will buy $40 billion of mortgage-backed securities a month, without a limit on the total or duration. The Fed also extended its near-zero interest rate policy until 2015 and said it will stay accommodative “for a considerable time” even after the economy strengthens.
Germany’s Federal Constitutional Court in Karlsruhe ruled on Sept. 12 that the country can ratify the 500 billion-euro European Stability Mechanism, dismissing motions filed by groups including a conservative lawmaker and an opposition political party that sought to block the fund. It stipulated that Germany’s 190 billion-euro contribution not be increased without legislative approval.
The International Monetary Fund is working with the Greek government to help the country get the deficit-reducing program attached to its bailout back on track, IMF spokesman Gerry Rice told reporters in Washington. Greece’s Prime Minister Antonis Samaras failed to obtain an agreement from his coalition partners on the spending cuts.
National benchmark indexes this week increased in all of the 18 western European markets except Denmark. The U.K.’s FTSE 100 rose 2.1 percent, France’s CAC 40 added 1.8 percent and Germany’s DAX Index climbed 2.7 percent. Italy’s FTSE MIB rallied 3.2 percent, while Spain’s IBEX 35 jumped 3.5 percent.
In China, imports declined 2.6 percent in August from a year earlier, the customs bureau said in Beijing on Sept. 10. That missed the median estimate of a 3.5 percent gain, according to economists surveyed by Bloomberg.
A measure of the region’s auto companies was the best- performing industry on the Stoxx 600 this week. French carmakers Peugeot SA and Renault SA gained 9.5 percent and 7.9 percent respectively. In Germany, preferred shares of Volkswagen AG advanced 7.9 percent, while Porsche SE rallied 6.9 percent.
A gauge of mining stocks jumped 5.4 percent, pacing copper that capped its biggest weekly increase in eight months on the London Metal Exchange. Kazakhmys surged 18 percent. BHP Billiton Ltd. (BLT), the world’s largest mining group, rose 7.5 percent, while Rio Tinto Group (RIO), the third-biggest, added 8.6 percent.
Lonmin Plc (LMI) advanced 3.1 percent after the third-largest platinum producer by volume resumed talks in South Africa to end a strike that has shut mines tapping the world’s richest reserves of the metal. Forty five people have died in the violence at Lonmin’s Marikana mine since Aug. 10.
An index of banking shares advanced 4.4 percent this week. National Bank of Greece SA (ETE) soared 28 percent in Athens. Germany’s Commerzbank jumped 15 percent, while France’s Credit Agricole SA (ACA) gained 11 percent. Among British lenders, RBS climbed 14 percent, Lloyds Banking Group Plc (LLOY) gained 8.1 percent and Barclays Plc (BARC) rallied 11 percent.
Lonza Group AG (LONN) jumped 13 percent, the biggest weekly increase since November 2008. The specialty-chemicals maker said on Sept. 13 it sold 305 million Swiss francs ($330 million) of bonds to refinance bridge loans used for its acquisition of Arch Chemicals Inc. JPMorgan Chase & Co. said the refinancing removed much of the “near-term financing overhang.”
EADS slumped 15 percent after saying on Sept. 12 it is in talks with BAE about a combination that would create a European counterweight to the likes of Boeing Co. BAE added 4.4 percent.
Burberry Group Plc (BRBY) tumbled 20 percent after the company said on Sept. 11 that full-year profit will “disappoint” analysts after sales growth slowed globally.
Adjusted pretax profit in the year through March will be at the lower end of analyst estimates, which range from 407 million pounds ($652 million) to 454 million pounds, the company said. The average estimate of 14 analysts compiled by Bloomberg is about 429 million pounds.
Hugo Boss AG fell 9.1 percent, LVMH Moet Hennessy Louis Vuitton SA lost 4.6 percent, while Christian Dior SA declined 4.7 percent.
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