European Stocks Post Weekly Gain on German Confidence

European stocks posted a weekly gain, rising to a 23-month high, as German investor confidence climbed to the highest in 2 1/2 years and U.S. lawmakers voted to temporarily suspend the government’s borrowing limit.

Unilever, the world’s second-largest consumer-goods maker, surged the most in in 15 months after revenue growth beat estimates. EasyJet Plc rose to a record as the airline’s sales increased in the three months to December. Banca Monte dei Paschi di Siena SpA fell 12 percent amid concern losses from derivatives contracts are threatening the lender’s earnings.

The Stoxx Europe 600 Index (SXXP) added 0.9 percent to 289.72 this past week, snapping two weeks of losses to close at the highest level since Feb. 18, 2011. The gauge has advanced 3.6 percent in 2013 as U.S. lawmakers agreed on a budget deal averting spending cuts and tax increased that had threatened to push the world’s biggest economy into a recession.

“Some of the dark clouds over the market are starting to dissipate,” Henk Potts, who helps oversee $282 billion as an equity strategist at Barclays Plc in London, said in a phone interview this week. “It has reassured a lot of investors which means we are able to start looking again at the cheap valuations and bright corporate picture.”

Some 60 percent of western European companies to have reported results since Jan. 8 exceeded analysts’ earnings estimates, according to data Bloomberg data. Profits at companies in the Stoxx 600 will grow 9.2 percent in 2013, projections compiled by Bloomberg show.

Debt Ceiling

The U.S. House of Representatives approved legislation to suspend the $16.4 trillion federal borrowing limit until May 19. President Barack Obama had accused Republicans of holding the nation hostage and risking a default by using the debt ceiling to push for further cuts to government spending.

In Germany, investor confidence increased to a 2 1/2-year high in January. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations climbed to 31.5 from 6.9 in December.

A measure of euro-area services and manufacturing output contracted at a slower pace this month than economists had estimated. A composite index based on a survey of purchasing managers in both industries rose to 48.2 from 47.2 in December, Markit Economics said. A reading below 50 indicates that activity shrank.

ECB Loans

The European Central Bank said financial firms will repay more of its emergency three-year loans than forecast in another sign the region’s debt crisis is abating. Some 278 financial institutions will return 137.2 billion euros ($185 billion) on Jan. 30, the first opportunity for early repayment of the initial three-year loan, compared with the median projection of 84 billion euros in a Bloomberg survey of economists.

National benchmark indexes rose in 16 of the 18 western European markets this week. France’s CAC 40 added 1 percent and Germany’s DAX Index gained 2 percent. The U.K.’s FTSE 100 Index advanced 2.1 percent even as Britain’s economy shrank a more- than-forecast 0.3 percent in the fourth quarter.

Unilever advanced 4.3 percent in London trading to the highest level since at least 1988. The consumer-goods company reported revenue growth that beat estimates for a third straight quarter, led by gains in North and South America and demand for personal-care products.

EasyJet surged 8.4 percent, its biggest increase in nine weeks. The discount airline rose to its highest price since its initial public offering in November 2000 after saying quarterly sales increased 9.2 percent.

Airlines Climb

A gauge of travel and leisure companies in the Stoxx 600 rose to the highest in almost five years as Air France-KLM Group and Ryanair Holdings Plc rallied 9.8 percent and 3.9 percent respectively.

International Consolidated Airlines Group SA, the parent of British Airways, added 7 percent, rising for a fourth week. Credit Suisse Group AG and JPMorgan Chase & Co. both upgraded their recommendations on the stock.

Vallourec SA, which produces steel pipes for the oil and gas industry, soared 10 percent, its biggest weekly advance in two months, as euro-area manufacturing data beat estimates.

Rightmove Plc rallied 7.2 percent, its biggest weekly advance in 17 months, as analysts at Barclays Plc and UBS AG recommended the shares. The owner of the U.K.’s largest residential property website said the number of sellers coming to market this month is 22 percent higher than a year ago.

Monte Paschi, the world’s oldest bank, sank 12 percent for the biggest drop since July. Italy’s central bank said Jan. 23 that the lender hid documents from regulators on deals that may prompt the bank to restate profit.

The company said on Jan. 17 it will review its accounts after Bloomberg News reported the lender engaged in a derivative with Deutsche Bank AG in 2008, dubbed “Project Santorini,” that obscured losses before it sought a government bailout the next year.

Nokia Oyj (NOK1V) slid 7 percent after the phone maker reported a seventh straight drop in quarterly revenue and said it will omit a dividend for the first time in at least 143 years.

To contact the reporter on this story: Sofia Horta e Costa in London at shortaecosta@bloomberg.net

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

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