European stocks rose for a fifth day as Federal Reserve Chairman Janet Yellen pledged to continue reducing stimulus as the economy strengthens.
Carmakers posted the biggest gain among 19 industry groups in the Stoxx 600 after Goldman Sachs Group Inc. boosted its growth forecasts for auto sales in western Europe. Michelin & Cie. gained 3.3 percent after maintaining its 2015 earnings projection. Barclays Plc sank 3.8 percent after saying its investment-bank division swung to a loss in the fourth quarter.
The Stoxx Europe 600 Index added 1.3 percent to 329.52 at the close of trading, taking its five-day gain to 3.8 percent. The gauge lost 5.5 percent from its six-year high on Jan. 22 through Feb. 4 amid concern about the Fed’s bond-buying cuts, China’s economic slowdown and volatility in developing markets.
“The Fed is busy with tapering but it will be done gradually,” Guillaume Duchesne, an equity strategist at BGL BNP Paribas SA in Luxembourg, said by telephone. “It won’t be a rapid exit, so globally, you have quite a positive mix for equities. Improving revenues for companies on one side, and on the other side, monetary policy that is not dramatically negative for interest rates.”
Yellen testified before the House Financial Services Committee as investors weigh the pace of stimulus reductions. While growth has picked up, “the recovery in the labor market is far from complete,” Yellen said today in the text of her remarks. She repeated the Fed’s outlook for further reductions in “measured steps” and that asset purchases are not on a “pre-set course.”
The Fed said in December that it would start cutting the monthly pace of asset purchases. It announced a $10 billion reduction that month, followed by a cut of the same size in January to $65 billion.
Data on Feb. 6 showed U.S. jobless claims dropped for the first time in three weeks. A government report the next day indicated payrolls rose by a less-than-projected 113,000 jobs in January and the unemployment rate unexpectedly fell to the lowest level in more than five years.
PSA Peugeot Citroen advanced 4.5 percent to 12.02 euros after Goldman Sachs added the company to its conviction-buy list. Bayerische Motoren Werke AG rose 3 percent to 84.45 euros after the New York-based bank recommended buying the stock. Nokian Renkaat Oyj (NRE1V) climbed 3.8 percent to 33.53 euros after HSBC Holdings Plc and SEB AB raised their ratings on the biggest tiremaker in the Nordic region.
Michelin, Europe’s largest tiremaker, climbed 3.3 percent to 83.67 euros. The company will stick with its earnings targets for 2015 as it predicts volume will rise this year and first-half spending on supplies will drop. The manufacturer will probably achieve its 1 billion-euro ($1.4 billion) cost-savings goal for 2016, Chief Executive Officer Jean-Dominique Senard said. Michelin will raise its dividend 4.1 percent to 2.50 euros a share, the company said.
Hexagon AB (HEXAB) rallied 6.5 percent to 224.10 kronor. The world’s largest maker of measuring instruments reported fourth-quarter net income of 104.1 million euros, exceeding the 98.2 million euros posted in the same period last year and beating analysts’ estimates. The Stockholm-based company also proposed increasing its dividend to 31 euro cents a share from 28 cents a year earlier.
ICAP Plc (IAP) increased 3.9 percent to 414.5 pence. Goldman Sachs raised its recommendation on the world’s largest broker of transactions between banks to neutral from sell after the stock dropped 13 percent from its Jan. 15 high through yesterday.
Lagardere SCA climbed 5.3 percent to 28.73 euros, the highest price since May. The French media company raised its 2013 profit forecast, saying earnings before interest and taxes will increase by more than 5 percent.
Barclays fell 3.8 percent to 264.7 pence. The U.K.’s second-largest lender by assets said its investment-bank unit had a pretax loss of 329 million pounds ($539 million) in the last three months of 2013, compared with a profit of 760 million pounds in the year-earlier period. The company said it will raise bonuses by 10 percent and cut jobs.
L’Oreal SA (OR) slipped 3.3 percent to 124.80 euros after earlier jumping as much as 4.5 percent. The world’s largest cosmetics company agreed to buy back 8 percent of its shares from Nestle SA for 6 billion euros. The maker of Maybelline mascara also reported a 4.8 percent increase in 2013 earnings, matching analysts’ estimates.
Alcatel-Lucent SA lost 4.4 percent to 3.10 euros. Morgan Stanley cut its rating on the French network supplier to equal weight from overweight at Morgan Stanley, meaning that it no longer recommends buying the stock. The brokerage cited valuations after the stock climbed 162 percent in the past year, trading near its highest price since July 2011.
Metro AG declined 2.2 percent to 30.95 euros. Germany’s largest retailer forecast annual earnings that missed analyst estimates amid a slow European economic recovery and strong euro. The company said earnings before interest, taxes and special items will probably be 1.75 billion euros, missing the 1.79 billion-euro average estimate of analysts surveyed by Bloomberg.
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