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European Stocks Rise to 18-Month High on China Optimism

European stocks rose to an 18-month high as China signaled wider policy support for economic recovery, outweighing a report that showed euro-area manufacturing and services output shrank for a 10th month.

HSBC Holdings Plc climbed to 1 1/2-year high after the bank agreed to sell its stake in China’s Ping An Insurance (Group) Co. for $9.4 billion. Vedanta Resources Plc (VED) jumped 2.6 percent. Tesco Plc rallied the most in 14 months after starting a review of its U.S. Fresh & Easy business. Nokia Oyj (NOK1V) gained 9.7 percent after winning a deal to sell its flagship smartphone in China.

The Stoxx Europe 600 Index added 0.2 percent to 276.91 at the close of trading. The benchmark gauge has surged 18 percent from this year’s low on June 4 as the European Central Bank and the Federal Reserve expanded economic support and optimism grew that U.S. lawmakers will avoid a looming fiscal deadlock.

“Investor sentiment is improving, and the market is receptive for positive news, such as the news out of China,” Otto Waser, chief investment officer at Research & Asset Management AG in Zurich, said in a telephone interview. “There’s still a wall of worry regarding the fiscal cliff that causes investors to be cautiously positioned which implies room to increase equity allocations.”

National benchmark indexes climbed in 12 of the 18 western European markets. France’s CAC 40 and Germany’s DAX each added 0.3 percent. U.K.’s FTSE 100 (UKX) rose 0.4 percent.

China Economy

China will keep macroeconomic policies stable, making adjustments as needed to deal with difficulties, the Communist Party’s Politburo said in its first assessment of the economy under new leader Xi Jinping.

The country will “face various challenges that should not be underestimated” next year, the official Xinhua News Agency said yesterday, citing a statement issued after a meeting of the ruling party’s top leaders. The world’s second-largest economy will expand domestic demand, actively promote urbanization, strengthen real-estate controls and support small business, Xinhua said.

Separately, the China Insurance Regulatory Commission abolished a rule limiting insurance companies’ investments in commercial banks.

“The government is gradually opening the channel for universal banking,” said Xie Jiyong, a Shanghai-based analyst at Capital Securities.

Euro-Area Output

European stocks briefly pared gains as a report showed that euro-area services and manufacturing output shrank for a 10th month in November. Separate data showed retail sales dropped more than forecast in October.

In the U.S., companies added 118,000 workers in November, fewer than projected by economists in a Bloomberg survey, according to the ADP Research Institute. Another report showed service industries expanded at a faster pace in November than economists projected.

HSBC (HSBA) gained 1.2 percent to 644.1 pence, the highest since May 13, 2011. The bank agreed to sell its stake in China’s Ping An Insurance to Thai billionaire Dhanin Chearavanont for $9.4 billion as Europe’s biggest bank by market value moves to revive profit and boost capital.

Banco Espirito Santo SA (BES) rose 2.6 percent to 83 euro cents and Commerzbank AG (CBK) added 1.4 percent to 1.41 euros, as a gauge of European lenders advanced for a second day.

An index of mining shares posted the best performance among the 19 industry groups in the Stoxx 600. Vedanta Resources climbed 2.6 percent to 1,094 pence. Rio Tinto Group and BHP Billiton Ltd. (BHP) jumped 3.1 percent to 3,226 pence and 2.4 percent to 1,998 pence, respectively.

Tesco, Nokia

Tesco rose 3.3 percent to 337.45 pence, the most in 14 months. The U.K.’s largest grocery company said it’s reviewing its U.S. Fresh & Easy business and that Tim Mason, the unprofitable unit’s head, will leave.

Nokia gained 9.7 percent to 2.77 euros, the highest in seven months. The Finnish mobile-phone maker unveiled a version of its Lumia 920T smartphone for China’s largest wireless carrier, China Mobile Ltd.

Aker Solutions ASA increased 5 percent to 109.70 kroner after saying it seeks to raise its margin based on earnings before interest, taxes, depreciation and amortization to 15 percent by the end of 2017. The company also said it will double revenue from 2012 to 2017.

Stagecoach Group Plc (SGC), which owns 49 percent of Virgin Trains, climbed 5.9 percent to 308.7 pence. First-half pretax profit of 124 million pounds ($200 million) beat the average analyst estimate that called for 114 million pounds.

Valiant Talks

Valiant Holding AG (VATN) rallied 6 percent to 100.1 Swiss francs, the biggest jump since June 1999, after the bank confirmed it’s in takeover talks with Berner Kantonalbank AG. Swiss blog Inside Paradeplatz reported earlier today that Berner Kantonalbank may acquire the company for about 2 billion francs ($2.2 billion).

Unibail-Rodamco SE (UL) fell 1.7 percent to 176.10 euros after Morgan Stanley cut Europe’s largest publicly-trader property owner to underweight, a recommendation similar to sell, from equal weight.

Swedish Match AB (SWMA), a maker of snuff, dropped 3.4 percent to 225 kronor. The European Commission may continue a ban on the export of Swedish snuff, Dagens Nyheter reported, citing a copy of the proposal.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

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

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