Italian banks led gains as Banca Monte dei Paschi di Siena SpA and Unione di Banche Italiane SCPA rallied at least 12 percent. GAM Holding AG jumped the most in almost four years as the asset manager said first-half profit more than tripled. Fresnillo Plc and Randgold Resources Ltd. increased at least 9 percent as prices for gold and silver rallied.
The benchmark Stoxx Europe 600 Index increased 0.1 percent to 306.36 this past week, extending its 2013 advance to 9.5 percent. The Euro Stoxx 50 Index added 1 percent for a sixth week of gains. Gross domestic product in the 17-nation euro area expanded 0.3 percent in the second quarter after a six straight periods of contraction, according a report on Aug. 14. That exceeded the median estimate of 0.2 percent growth in a Bloomberg survey of economists.
“The global economy is improving, which means company profitability will improve, which means equity as an asset class should attract new money,” Kevin Lilley, head of European Equities at Old Mutual Global Investors, which manages about $17 billion, said by phone. “For the first time in two years, with a continuation of positive news flows, the man on the street might go out and purchase that car he’s been thinking about, the new television or remodel his house.”
The Stoxx 600 slid 1.1 percent on Aug. 15, the most in five weeks, as a U.S. Labor Department report showed initial jobless-benefit claims unexpectedly dropped to the lowest level in almost six years. The better-than-forecast data fueled speculation the Fed will pare the pace of bond buying and pushed 10-year Treasury yields to a two-year high.
The Fed will probably reduce its $85 billion in monthly debt purchases at its meeting on Sept. 17-18, according to 65 percent of economists surveyed by Bloomberg from Aug. 9 to Aug. 13. In a survey last month, half of economists predicted a reduction at next month’s meeting.
National benchmark indexes advanced in 13 of the 18 western European markets this week. France’s CAC 40 Index climbed 1.2 percent and Germany’s DAX Index increased 0.6 percent. The U.K.’s FTSE 100 Index sank 1.3 percent, while the Swiss Market Index (SMI) retreated 0.2 percent.
Italian banks posted the biggest gains in the Stoxx 600, as the extra yield investors demand to hold the nation’s 10-year bonds over benchmark German bunds shrank to the lowest level in two years. Monte Paschi, the third-largest bank in Italy, surged 14 percent and UBI rallied 12 percent.
GAM jumped 15 percent, the most since October 2009. The asset manager that split from Julius Baer Group Ltd. almost four years ago said first-half profit more than tripled after fee and commission income increased.
Fresnillo (FRES), the world’s largest primary silver producer, surged 13 percent and Randgold, a producer of the precious metal in Africa, jumped 9.1 percent. Gold climbed to the highest price in almost two months and silver rose to the highest since May.
A measure of travel and leisure companies posted the biggest decline of 19 industry groups in the Stoxx 600, retreating 2.3 percent. In Egypt, at least 600 people died following Aug. 14 police assaults on two squares in Cairo and Giza where Muslim Brotherhood supporters were camped out to demand the return of ousted President Mohamed Mursi, according to the official death toll.
Thomas Cook Group Plc (TCG) tumbled 9.9 percent for the biggest drop in five months. UBS AG removed the 172-year-old U.K. tour operator from its list of preferred stocks, citing the “high-profile media coverage” of the violence in Egypt.
TUI Travel Plc, Europe’s largest tour operator, retreated 4.6 percent, the most in four months.
Airlines fell as crude oil advanced. EasyJet plunged 8.7 percent and International Consolidated Airlines Group SA fell 4.4 percent. Ryanair Holdings Plc lost 8.3 percent for the biggest drop in 2 1/2 years.
Ophir Energy Plc tumbled 12 percent as the explorer and BG Group Plc delayed plans to start deepwater drilling off Tanzania in September. Ophir also postponed exploration plans in Gabon and Equatorial Guinea, and is studying its options in Ghana following unsuccessful drilling there.
Geberit AG fell 11 percent, the most since August 2011. The maker of toilets and bathroom piping said there’s been “a clear fall in demand” in most European markets since the fourth quarter of 2012 and a continued downturn in public construction in North America.
U.K. homebuilders declined as increasing bond yields spurred concern rising interest rates may hinder the housing recovery. Barratt Developments Plc (BDEV) sank 7.4 percent, Persimmon Plc fell 3.6 percent and Taylor Wimpey Plc lost 3.7 percent.
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