European Stocks Gain on Spain Bailout Speculation
European stocks rose to a one-week high after a report said that policy makers will next week unveil an economic reform program for Spain that will allow the country to seek a bailout.
Novo Nordisk A/S (NOVOB) climbed 1.3 percent after UBS AG advised investors to buy the shares. Vodafone Group Plc (VOD) gained 2 percent after Barclays Plc raised its price target on the stock. Elan Corp. increased 2 percent after the company named a new chief operating officer.
The Stoxx Europe 600 Index (SXXP) advanced 0.5 percent to 275.78 in London, the highest since Sept. 14. The gauge has rallied 18 percent from this year’s low on June 4 as central banks from Europe to the U.S. added stimulus measures to bolster the global economy.
“Spain is the most critical country because all its economic actors -- individual companies, banks and states -- are indebted,” said Pierre Mouton, a portfolio manager who helps oversee $6 billion at Notz Stucki & Cie. in Geneva. “There’s market speculation of a bailout, though the official line is still that Spain won’t seek one. If the bond spreads widen again, that will accelerate a bailout process.”
Futures and options contracts on equities indexes expired today, in a process known as quadruple witching. The volume of shares changing hands on the Stoxx 600 companies was 72 percent higher than the average of the past 30 days, data compiled by Bloomberg showed.
Spanish Economy Minister Luis de Guindos is in talks with European Commission authorities to facilitate a new bailout program that will be presented Sept. 27, the Financial Times reported, citing unidentified officials involved in the discussions. The plan will focus on structural measures sought by the EU and not on new taxes or spending cuts, the FT said.
Any additional conditions attached to an aid program for Spain will be “light,” as the current measures undertaken by the government are “sizable,” UniCredit SpA economist Tullia Bucco wrote in a note.
Deputy Prime Minister Soraya Saenz de Santamaria said this week that the Mediterranean nation will consider seeking a bailout if the conditions imposed are acceptable.
Italy and Spain won’t request aid unless they are unable to borrow from the market because of rising bond yields, Gianfranco Polillo, Italy’s undersecretary of finance said in an interview in Rome yesterday.
The yield on Spain’s 10-year bonds fell two basis points this week to 5.76 percent. It rose above the 6 percent mark in intraday trading earlier in the week.
In the U.S., the Federal Reserve Bank of Minneapolis President Narayana Kocherlakota yesterday said the country’s central bank should hold interest rates near zero percent until unemployment drops below 5.5 percent. He reversed his view in May that the Fed may need to raise rates this year or the next.
Novo Nordisk climbed 1.3 percent to 917 kroner after UBS raised the rating on the shares to buy from neutral.
Vodafone added 2 percent to 178.45 pence after Barclays increased its share-price target to 200 pence from 195 pence and reiterated a buy recommendation.
Elan rose 2 percent to 8.70 euros. Hans Peter Hasler will take over as chief operating officer from Oct. 1, the company said late yesterday. Hasler is currently the chairman of HBM BioVentures AG.
Imagination Technologies Group Plc (IMG) added 3.9 percent to 531.5 pence, paring a 13 percent loss seen in the four days through yesterday, after JPMorgan Chase & Co. listed it as one of the companies that will benefit from the product cycle of the iPhone 5 in the next 12 to 18 months. Apple Inc. began selling its latest version of the iPhone today.
Devgen (DEVG) NV soared 69 percent to 15.89 euros, the biggest rally since it sold shares to the public in June 2005, after Syngenta AG offered to buy the company for 16 euros per share. That’s a 70 percent-premium to yesterday’s closing price of 9.43 euros.
Rhoen-Klinikum AG (RHK) jumped 3.6 percent to 15.13 euros after Manager Magazin reported that Sana Kliniken AG was preparing a bid for the German hospital operator.
Mediobanca SpA (MB), Italy’s biggest publicly traded investment bank, gained 3.3 percent to 4.21 euros after UBS AG raised its share-price target to 4.1 euros from 3.5 euros and kept a neutral rating. Equita SIM SpA raised the target to 4.9 euros from 4.4 euros and retained a buy recommendation.
Opap SA, Greece’s biggest gambling company, slid 2.3 percent to 4.20 euros after Credit Suisse Group AG lowered its rating on the shares to underperform, the equivalent of sell, from outperform, a rating similar to buy.
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