European Stocks Post Weekly Gain Amid Stimulus Optimism

European stocks posted their biggest weekly gain in two months amid optimism that central banks from the U.S. to Japan will continue their stimulus measures.

Royal Bank of Scotland Group Plc, Britain’s biggest government-owned lender, surged 10 percent after Goldman Sachs Group Inc. upgraded the shares. Ashmore Group Plc jumped 15 percent after reporting net inflows of $4.5 billion in its fiscal fourth quarter. Red Electrica Corp. dropped 6.5 percent as Spain’s government said it will limit returns for the transportation and generation of power.

The Stoxx Europe 600 Index rose 2.7 percent to 296.2 this past week, its biggest gain since the week ending April 26. The gauge has pared its retreat from its 2013 high on May 22 to 4.6 percent as Federal Reserve Chairman Ben S. Bernanke said the U.S. economy still needs stimulus and Alcoa Inc. started the earnings season with results that beat analysts’ estimates.

“Following the Fed’s fairly unequivocal comments on maintaining loose monetary policy, with specific reference to the unacceptable unemployment rate, equities have rallied again,” Richard Hunter, head of equities at Hargreaves Lansdown Plc in London, wrote in an e-mail. “Elsewhere, there have been mixed messages emanating from China, with some caution ahead of the impending second-quarter growth numbers due next Monday being offset by hopes of further stimulus in the region.”

Fed Stimulus

Bernanke said on July 10 that the U.S. economy will continue to need stimulus measures because of low inflation and high unemployment.

“Highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy,” Bernanke said in response to a question following a speech in Cambridge, Massachusetts. The Federal Open Market Committee released the minutes of its June 18-19 meeting earlier the same day. They showed many Fed officials wanted to see more signs employment is improving before agreeing to trim bond purchases. About half of the 19 participants wanted to halt the $85 billion in monthly bond purchases by the end of the year.

Alcoa, the first member of the Dow Jones Industrial Average to report quarterly results, posted profit excluding some expenses of 7 cents a share. That beat the 6-cent average of 15 estimates compiled by Bloomberg. Sales fell to $5.85 billion. That still beat the $5.79 billion average projection.

Bank of Japan

In Asia, the Bank of Japan indicated on July 11 that it will continue with its accommodative policies.

In a speech in a Singapore on June 12, European Central Bank executive-board member Vitor Constancio said that the euro area’s slow economic recovery “implies that monetary policy has to stay accommodative for a longer period of time.”

RBS (RBS) surged 10 percent after Goldman Sachs increased its rating on the state-owned lender to buy from neutral. The U.S. investment bank said a split of RBS would allow the bank to focus on profitable operations while accelerating a privatization of the bank.

A gauge of mining companies jumped 5.6 percent this week as copper and lead climbed. BHP Billiton Ltd. and Rio Tinto Group, the world’s two biggest mining companies, jumped 8 percent and 6.2 percent, respectively. Anglo American Plc, the world’s largest platinum producer, rose 6.4 percent.

Ashmore surged 15 percent after reporting net inflows of $4.5 billion in its fiscal fourth quarter. The U.K. fund manager focused on emerging markets said conditions proved more challenging toward the end of the quarter.

Invensys Plc soared 21 percent as the British maker of industrial software and control systems received a 3.3 billion-pound ($5 billion) takeover proposal from Schneider Electric SA. The French maker of low- and medium-voltage equipment offered to pay 505 pence a share.

Portugal’s Banks

Portugal’s PSI 20 Index slipped 0.8 percent this week as President Anibal Cavaco Silva urged the two-party coalition and the main opposition grouping to reach an agreement to let the government complete its aid program.

While the president’s stance allows the government to stay in office for now, he didn’t say if he accepted Prime Minister Pedro Passos Coelho’s proposal to promote Paulo Portas to vice premier with responsibility for negotiating over austerity measures with the European Commission, the European Central Bank and the International Monetary Fund.

Banco Espirito Santo SA, the nation’s second-biggest listed bank, retreated 3.6 percent.

Red Electrica dropped 6.5 percent as Spain’s Industry Minister Jose Manuel Soria said the state will set limits on returns for renewable-energy generators and cut capacity payments for gas-fired plants. He added that consumers will have to pay an additional 900 million euros.

G4S Plc slumped 7.4 percent after the U.K. government referred the provider of security services to the Serious Fraud Office. The Lord Chancellor said G4S overcharged for its electronic-tagging services and claimed money for monitoring dead people.

To contact the reporter on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net

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

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