European stocks posted a weekly gain, snapping two weeks of losses, as concern over a potential default by the U.S government faded and the nomination of Janet Yellen as the next Federal Reserve chairman signaled the continuation of stimulus.
Celesio AG surged 19 percent as McKesson Corp. was said to be in talks to buy a majority stake in the drug wholesaler. Persimmon Plc and Taylor Wimpey Plc led house builders higher as British property prices surged to an 11-year high and Goldman Sachs Groups Inc. predicted further growth. TGS Nopec Geophysical Co. slumped 16 percent after reducing its sales forecast because of delays in getting permits for new surveys.
The Stoxx Europe 600 Index added 0.6 percent to 311.61 this week, after slipping 1.4 percent in the previous two weeks. The gauge has rallied 11 percent so far in 2013 as the euro area emerged from a recession and central banks maintained stimulus measures to support the global economy.
“Many investors believe that a solution to the U.S. debt problem will be found, even if just a temporary one,” said Yves Maillot, who manages 18.5 billion euros ($25 billion) as head of European equities at Natixis Asset Management in Paris. “If President Obama is happy with postponing a permanent decision until November, that would be enough for now. Central bank policy will remain easy and Yellen’s nomination helps with certainty in this respect.”
National benchmark indexes advanced in 13 of the 18 western European markets this week. Germany’s DAX increased 1 percent to a record, while the U.K.’s FTSE 100 (UKX) added 0.3 percent. France’s CAC 40 rose 1.2 percent.
The Stoxx 600 lost 1.5 percent in the first three days of the week as a partial shutdown of the U.S. government continued. President Barack Obama refused to negotiate over preconditions for the House of Representatives to authorize government spending and an increase in the $16.7 trillion borrowing limit.
Obama warned the world’s biggest economy would slide into a recession if lawmakers failed to raise the ceiling. Without Congressional action, the U.S. would exhaust its borrowing authority by Oct. 17, according to the Treasury Department.
Stocks reversed losses as signs of a temporary resolution to the fiscal impasse emerged later in the week when House Republicans proposed a short-term increase to the debt ceiling that would buy the government time until Nov. 22 to conclude a longer agreement.
Obama on Oct. 9 nominated Fed Vice Chairman Yellen, 67, as the central bank’s next chairman to succeed Ben Bernanke, whose term ends on Jan. 31. Yellen is one of the key architects of the Fed’s unprecedented stimulus program, which it unexpectedly refrained from paring last month.
Investors also turned their attention to corporate earnings as the shutdown delayed the release of some U.S. economic data. Alcoa Inc., JPMorgan Chase & Co. and Wells Fargo & Co. all posted results that exceeded analysts’ estimates as they kicked off the first week of the U.S. quarterly reporting season.
Celesio jumped 19 percent, its biggest weekly rally since at least 1996. McKesson, the largest U.S. drug distributor, may acquire a majority stake the German company, the person said. The offer may be valued at almost 22 euros a share for majority shareholder Franz Haniel & Cie GmbH’s stake in the company, Dow Jones reported, citing unnamed people.
A gauge of British builders and household-goods companies rallied 2.7 percent. A home-price gauge from the Royal Institution of Chartered Surveyors increased last month to 54, the highest since June 2002, a report based on a poll of property surveyors showed.
Persimmon jumped 11 percent. Goldman Sachs said the stock may gain 70 percent within six months as it benefits from a housing recovery outside London. Taylor Wimpey rose 8.9 percent as Goldman added the company to its “conviction buy” list.
A measure of banks posted the biggest increase among the 19 industry groups on the Stoxx 600 this week. Portuguese lender Banco Espirito Santo SA soared 19 percent this week. The stock has advanced for nine days, its longest winning streak in eight years.
Whitbread Plc climbed 8.4 percent as brokerages from Oriel Securities Ltd. to Citigroup Inc. increased their ratings on the company. Oriel cited an improvement in the U.K. hotel market, while Citigroup said rebounding economic sentiment in Europe will lead to earnings upgrades.
TGS, a Norwegian surveyor of oil and gas fields, slumped 16 percent. Sales for the full year will probably not exceed $870 million, the company said. That’s down from a previous forecast for revenue in the range between $920 million and $1 billion.
Delhaize Group fell 7.5 percent after saying Stefan Descheemaeker will step down as Chief Executive Officer for Europe at the end of the month. Chief Financial Officer Pierre Bouchut may also leave the Belgian retailer for Veolia Environnement, according to a Les Echos report. The French newspaper did not say where it got the information.
Croda International Plc also lost 7.5 percent. The world’s second-largest maker of cosmetics ingredients was cut to hold from buy at Liberum Capital Ltd., which cited high valuation. Before the rating change, the stock traded at 19.5 times its projected earnings, compared with the five-year average of 15.3.
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