Swiss Stocks Advance on Spain Bailout Report

Swiss stocks advanced to an 18- month high following a report that Spain and the European Commission have discussed a package of reforms needed to obtain a bailout for the country.

Transocean Ltd. climbed 2.5 percent after Petroleo Brasileiro SA pledged to support the Swiss rig operator’s legal battles after last November’s oil spill. Kuoni Reisen Holding AG rose 1.2 percent after Switzerland’s largest travel company announced it will shut or sell smaller, unprofitable tour- operating businesses in countries such as Italy and Spain.

The Swiss Market Index (SMI) increased 0.8 percent to 6,605.82 at the close in Zurich, its highest level since March 2011. The equity benchmark rose 0.7 percent this week, its third consecutive weekly advance. The gauge has rallied 16 percent from this year’s low on June 4 as central banks in the U.S., Japan and the euro area opted for further stimulus. The broader Swiss Performance Index added 0.7 percent today.

“Spain asking for a bailout is the prerequisite for Mario Draghi’s plan to work,” said Henrik Drusebjerg, a senior strategist at Nordea Bank AB in Copenhagen, where he helps oversee $220 billion. “The European Central Bank won’t start buying bonds to bring down yields unless a country asks to be helped first.”

Spain’s Economy Minister Luis de Guindos has held talks with the commission about a series of structural reforms that will be unveiled on Sept. 27, the Financial Times reported, citing unidentified officials involved in the discussions. The European Union would need Spain to meet specific conditions before proceeding with a full bailout of the country.

Bailout Conditions

Deputy Prime Minister Soraya Saenz de Santamaria said this week that the government will only seek a bailout if it finds the conditions 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 late yesterday.

The Swiss National Bank said the outlook for the sales growth of Switzerland’s companies remains “cautiously optimistic in all industries.” The central bank cited the results of a quarterly survey. The SNB said “the main source of concern about future developments continues to be the uncertainty surrounding the European debt crisis.”

Transocean rose 2.5 percent to 43.40 Swiss francs after Petrobras’s Chief Executive Officer, Maria das Gracas Foster, said Brazil’s state-run oil producer will support Transocean.

Petrobras “doesn’t want to consider” losing the Swiss company and its rigs, the CEO said at an oil conference in Rio de Janeiro. Petrobras needs the eight rigs from Transocean to meet its production targets, she said.

Kuoni Reisen

Kuoni (KUNN) added 1.2 percent to 263 francs after saying it will shut or sell smaller tour-operating units, which have combined annual revenue of about 300 million francs ($322 million). The measures will probably reduce earnings before interest and taxes this year by 80 million francs, Kuoni said.

“Kuoni no longer wants to run these activities” and will consider selling part or all of the businesses, possibly to their management, or closing them, it said.

Weatherford International Ltd. (WFT), the Swiss-based oil services company, dropped 2.1 percent to 11.85 francs. SIX Swiss Exchange said it has started an investigation into the company over possible breaches of rules governing the disclosure of management transactions.

To contact the reporters on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net;

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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