European Stocks Advance to Six-Year High on China Data

European stocks advanced to the highest level in more than six years as Chinese manufacturing expanded at the fastest pace since December.

Det Norske Oljeselskap ASA rallied the most since October 2011 after agreeing to buy Marathon Oil Corp.’s Norwegian business for $2.7 billion. Air France-KLM Group rose 2.5 percent after a report that the airline will start a 1 billion-euro ($1.4 billion) cost-cutting program in 2015. STMicroelectronics (STM) NV fell 2.6 percent after Citigroup Inc. recommended selling shares in Europe’s largest semiconductor maker.

The Stoxx Europe 600 Index gained 0.2 percent to 345.08, the highest level since January 2008. The benchmark advanced 1.9 percent in May as European Central Bank President Mario Draghi said that the central bank was ready to ease monetary policy in June if necessary. The ECB’s policy makers meet on Thursday.

“With European companies’ big exposure to the Chinese market, investors are carefully watching the data out of China,” said Kai Fachinger, who helps oversee 3 billion euros as a portfolio manager at RobecoSAM AG in Zurich. “The PMI report implies a stabilization of the recent numbers that had shown some deceleration. Improving macro-economic data is supporting sentiment as investors wait to see what the ECB will do this week.”

The volume of shares changing hands in Stoxx 600 companies was 22 percent lower than the average of the last 30 days, according to data compiled by Bloomberg.

Manufacturing Reports

In China, the government’s measure of manufacturing activity rose to 50.8 in May from 50.4 in April. The China Federation of Logistics and Purchasing and the National Bureau of Statistics’ purchasing managers’ index exceeded the 50.7 median estimate of economists surveyed by Bloomberg News. Numbers greater than 50 mean that activity expanded.

European stocks pared their gains briefly after the Institute for Supply Management published the latest reading of its manufacturing index at 10 a.m. New York time, showing a slowdown in May. The ISM later corrected that report and said growth accelerated.

Separate data confirmed that the euro area’s manufacturing industry expanded at a slower pace last month. Markit Economics’ PMI of activity in the 18-nation currency bloc slipped to 52.2 in May from 53.4 in April. Economists surveyed by Bloomberg News had forecast a reading of 52.5.

National benchmark indexes rose in 14 of the 17 western European markets open today. Ireland’s market was closed for June holiday. The U.K.’s FTSE 100 added 0.3 percent. France’s CAC 40 and Germany’s DAX were little changed.

Commodity Producers

Mining companies posted the best performance of the 19 industry groups in the Stoxx 600, climbing 1.5 percent. Anglo American Plc and Rio Tinto Group rose 2.3 percent to 1,491.5 pence and 2.1 percent to 3,120 pence, respectively.

Det Norske jumped 9.1 percent to 69.05 kroner. The company’s purchase of Marathon Oil Norge AS will add about 60,000 barrels of oil equivalent a day to production in 2014, Chief Executive Officer Karl Johnny Hersvik said in a presentation today. The deal will probably close in the fourth quarter if it wins the approval of regulators, the company said in a statement.

Air France-KLM advanced 2.5 percent to 11.46 euros. De Telegraaf reported today that the airline plans to achieve its cost-cutting targets in three years. The newspaper cited confidential documents.

Orion Profit

Orion Oyj rallied 15 percent to 26.66 euros, the biggest gain since it was spun out off Orion Corp. in 2006. The Finnish drugmaker upgraded its profit forecast for 2014 because of an agreement with Bayer AG to jointly develop and sell a treatment for prostate cancer. Orion said operating profit will now be similar to that in 2013. It had forecast a slight decline.

Bayer will pay royalties on the cancer treatment once it goes on sale, Orion said in a statement. The two companies will begin testing the drug on patients this year.

Roche Holding AG added 1.9 percent to 268.40 Swiss francs. The world’s biggest maker of cancer drugs agreed to buy Genia Technologies Inc. for as much as $350 million as part of an expansion in the gene-sequencing market.

Banca Popolare di Sondrio Scarl increased 5.3 percent to 5.11 euros after Corriere della Sera reported today that the bank may be a candidate for a merger with Credito Valtellinese Scarl. The newspaper didn’t cite anyone. Credito Valtellinese rallied 6.6 percent to 1.13 euros.

STMicroelectronics fell 2.6 percent to 7.16 euros after Citigroup lowered the stock to sell from neutral. The brokerage said the shares’ recent rally has outstripped the company’s potential for returns. The semiconductor producer has rallied 26 percent this year, while the Stoxx 600 has gained 5.9 percent.

Lagardere SCA (MMB) lost 1.9 percent to 25.08 euros. Societe Generale SA lowered the publisher of the Asterix series of books to hold from buy. The brokerage said Lagardere will find it difficult to meet the 3 percent organic-growth target set out at its investor day on May 28 in the short term.

(An earlier version of the story was corrected after the Institute for Supply Management changed its data.)

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net Srinivasan Sivabalan

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