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European Stocks Post First Weekly Gain Since May 17

(Corrects to change the description of Polymetal International Plc in the 18th paragraph of the story published on June 28 and 29.)

European stocks posted their first weekly advance since May 17 as China took steps to ease a cash crunch and U.S. data boosted optimism the global economy can withstand a paring of central-bank stimulus.

Mediaset (MS) SpA jumped 15 percent as Credit Suisse Group AG raised its price target for the shares. Debenhams Plc (DEB) rallied the most since 2011 after saying it maintained sales even as cold weather reduced spending on summer clothing. Afren Plc rose 8 percent after saying oil found off the coast of Nigeria may exceed its estimates. Pandora A/S, which makes gold and silver jewelry, jumped 11 percent as precious metals tumbled.

The benchmark Stoxx Europe 600 Index rose 1.7 percent to 285.02 this past week, snapping five weeks of losses. The gauge still posted its first monthly drop since May 2012 and closed the quarter with a 3 percent decline. It has retreated 8.2 percent since May 22 after Federal Reserve Chairman Ben S. Bernanke said the central bank could reduce quantitative easing if the U.S. economy improves sustainably.

“Assuming we see positive economic data for the next few months, then what you should see is a market that can hand off from life support towards some underlying growth,” Alex Friedman, chief investment officer at UBS AG’s wealth-management unit told Francine Lacqua this week. “China said essentially that it wants to make sure it doesn’t have a bubble on the credit side, and they clamped down a little bit. That’s a good thing.”

The VStoxx Index, which measures the cost of using options to hedge against swings in the Euro Stoxx 50 Index, fell 9.3 percent this week, halting five consecutive weeks of gains.

China Turbulence

China’s money-market rates eased after the People’s Bank of China said it provided funding to some financial institutions to stabilize interbank lending rates and will use short-term liquidity operations and existing loan-facility tools to steady the market. The rates had surged in the week through June 21.

The measures pushed the seven-day repurchase rate lower to 6.16 percent from a record 12.45 percent on June 20, according to data from the National Interbank Funding Center. The one-year interest-rate swap slid 44 basis points to 3.97 percent, data compiled by Bloomberg show. It reached an all-time high of 5.06 percent in intraday trading on June 20.

Fed Presidents

In the U.S., Atlanta Fed President Dennis Lockhart said investors may have overreacted to Bernanke’s comments on a potential reduction in stimulus. William C. Dudley, president of the Fed Bank of New York, said any decision to slow the pace of asset purchases wouldn’t represent a withdrawal of stimulus.

Separately, Richard Fisher, president of the Dallas Fed, and Minneapolis Fed President Narayana Kocherlakota emphasized that the central bank isn’t rushing to take away the stimulus.

Investors watched U.S. data this week to help gauge the strength of the world’s biggest economy. Reports showed consumer confidence, orders for durable goods, and sales of new and previously owned homes increased more than economists had predicted. Still, a June 26 report showed slower-than-estimated U.S. economic growth for the first quarter.

Industrial output in Japan rose 2 percent in May, the most since December 2011, a report showed. That beat the median projection in a Bloomberg survey for a 0.2 percent gain from the previous month.

Elsewhere, European Central Bank President Mario Draghi said in a June 25 speech that the euro-area economy still requires a loose monetary policy from the central bank.

National benchmark indexes rose in 11 of the 18 western European markets this week. The U.K.’s FTSE 100 gained 1.6 percent, France’s CAC 40 climbed 2.2 percent and Germany’s DAX Index (DAX) advanced 2.2 percent.

Advertising Markets

Mediaset rallied 15 percent as Credit Suisse raised its price target on the broadcaster to 4.40 euros from 2.65 euros. The brokerage cited growing evidence that the television-advertising markets in Italy and Spain have bottomed.

Debenhams gained 8.8 percent, its largest weekly advance since December 2011. JPMorgan Chase & Co. upgraded its rating on the stock to overweight, a recommendation similar to buy, from neutral. The bank cited a robust quarter for the U.K. retailer amid what was a difficult period across the industry. Sales at stores open at least a year were unchanged in the 16 weeks ended June 22, the London-based retailer said.

Afren rose 8 percent. Drilling tests at the Ogo-1 well in the Gulf of Guinea showed hydrocarbon resources that may exceed the company’s initial estimates. Afren holds about 23 percent of the block where the well is located.

Pandora jumped 11 percent, extending its 2013 rally to 56 percent. Jyske Bank A/S raised its recommendation on the stock to buy from reduce, saying the company’s profit margin may widen as gold and silver touched their lowest prices since August 2010 this week.

Precious Metals

Polymetal International Plc, which operates gold and silver mines in Russia and a gold-and-copper mine in Kazakhstan, tumbled 14 percent. Gold posted its biggest quarterly drop since at least 1920, while silver plunged the most in 32 years this quarter.

A gauge of mining companies posted the only decline among all 19 industry groups on the Stoxx 600. Fresnillo Plc and Randgold Resources Ltd. fell 3.2 percent and 2.9 percent respectively, while Anglo American Plc lost 6.4 percent.

Subsea 7 SA retreated 16 percent as the oil-field services provider said its earnings will fail to grow this year. The Norwegian company increased its estimate for the full-life loss on the Guara-Lula project off the coast of the Brazil.

Lanxess AG slumped 7.8 percent as China said it will levy an anti-dumping duty on toluidine imports from the European Union for five years. The chemical manufacturer will pay a charge of 19.6 percent in China, according to the Chinese Ministry of Commerce.

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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