European Stocks Gain for Week on Results, Draghi Comments
European stocks climbed this week as companies from Anheuser-Busch InBev NV to Bayer AG posted quarterly earnings that beat estimates and as the European Central Bank said interest rates will remain low.
AB InBev, the world’s biggest brewer, jumped 11 percent, leading food-and-beverage stocks higher. Bayer paced gains among chemical makers as it surged 7 percent. Alcatel-Lucent SA soared 17 percent after quarterly profit exceeded projections. K+S AG posted its biggest weekly drop in more than 14 years as OAO Uralkali forecast that potash prices will plummet.
The Stoxx Europe 600 Index advanced 1.8 percent to 304.15 this week. The equity benchmark has risen every day this week, its longest winning streak since April. That pushed its valuation to 13.8 times estimated earnings, the highest since December 2009. More than 140 Stoxx 600-listed companies reported earnings this week, according to data compiled by Bloomberg.
“Investors have a far more positive outlook on European equities now than before as they are hoping the economy will oblige and show an improvement next year,” Andrew Parry, who oversees about 2 billion euros ($2.7 billion) as chief executive officer of Hermes Sourcecap Ltd. in London, said in a phone interview. “Expectations for profit have already fallen so much that if a company is posting slightly better earnings on depressed estimates, that’s a welcome relief.”
Analysts have lowered their profit forecasts for companies listed on the Stoxx 600 since the beginning of this year. Estimates have fallen 8.3 percent to 22.09 euros per share, according to data compiled by Bloomberg.
ECB President Mario Draghi said on Aug. 1 that interest rates in the euro zone will remain low for an extended period of time. He also said there are indications that the combined economy of the currency bloc is stabilizing. The ECB and the Bank of England left their benchmark interest rates unchanged at 0.5 percent, as forecast by economists in Bloomberg surveys.
In China, the government’s gauge of manufacturing activity unexpectedly rose to 50.3 in July. Economists had forecast a decline to 49.8. An index of factory output released by HSBC Holdings Plc and Markit Economics on Aug. 1 fell to 47.7, its lowest level in 11 months. A reading of 50 is the dividing line between expansion and contraction.
In the U.S., a Commerce Department report on July 31 showed that the world’s largest economy grew at a 1.7 percent annual rate in the second quarter, more than the 1 percent forecast in a Bloomberg survey. Gross domestic product expanded at a revised 1.1 percent pace in the first three months of the year.
A Labor Department release today showed that the U.S. economy created fewer jobs last month than forecast. Employers added 162,000 workers in July. Economists had predicted net hiring of 185,000.
National benchmark indexes rose in all 18 western-European markets this week. The U.K.’s FTSE 100 advanced 1.4 percent, while France’s CAC 40 (CAC) climbed 1.9 percent and Germany’s DAX Index added 2 percent.
Gauges of food-and-beverage producers and chemical makers posted the biggest gains of the 19 industry groups on the Stoxx 600 this week. AB InBev rallied 11 percent, its biggest jump since March 2009. The brewer of Stella Artois lager said so-called organic normalized earnings before interest, taxes, depreciation and amortization rose 5.8 percent in the second quarter. Analysts had called for profit growth of 3.7 percent. SABMiller, the second-biggest brewer, increased 4.1 percent.
Diageo Plc (DGE) added 5.3 percent after the brewer of Guinness stout posted full-year operating profit excluding some items of 3.53 billion pounds ($5.4 billion). That beat the 3.48 billion-pound median estimate.
Bayer jumped 7 percent as the German maker of chemicals and drugs said Ebitda rose 1.2 percent to 2.20 billion euros in the second quarter. That exceeded the 2.16 billion euros predicted by analysts in a Bloomberg survey.
Elementis Plc surged 11 percent as the British supplier of specialty chemicals said operating profit will improve in the second half of this year. Umicore SA advanced 6.7 percent as the world’s biggest precious-metals recycler maintained its profit forecast on July 30 following a drop in metal prices.
Alcatel-Lucent surged 17 percent, its biggest gain since January, after the French maker of networking equipment on July 30 reported second-quarter sales and operating profit that beat analysts’ estimates and said Qualcomm Inc. agreed to buy a minority stake.
K+S sank 29 percent, its biggest drop since at least 1998, as Uralkali, the world’s biggest producer of potash, said July 30 that prices of the crop nutrient may fall below $300 a ton. Uralkali ended a joint venture with Belaruskali that had controlled potash exports from Belarus. Uralkali said it will increase annual production and export independently. The venture had set potash prices well above producers’ cash costs.
Royal Dutch Shell Plc declined 5.2 percent as Europe’s biggest oil company on Aug. 1 reported earnings that missed estimates by the most since 2008. Shell posted a 20 percent drop in second-quarter profit, saying it lost about 100,000 barrels of oil equivalent a day during the period because of crude theft, sabotage and a blockade of gas shipments.
BP Plc, Europe’s second-largest oil producer, dropped 3.3 percent after reporting second-quarter profit that missed analysts’ projections. An index of oil and gas companies posted the worst performance on the Stoxx 600.
Barclays Plc plunged 11 percent as the U.K.’s second-largest bank by assets said on July 30 it will raise 5.8 billion pounds in a rights offering to increase capital as first-half profit fell 17 percent.
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