European stocks advanced for a second week as investors speculated that corporate profits and improving macro-economic data will overcome the region’s sovereign-debt crisis.
Prudential Plc led gains as UBS AG recommended Britain’s largest insurer. Bank of Ireland Plc jumped 22 percent as lawmakers backed the Irish government’s budget. Burberry Group Plc climbed amid takeover speculation. ASML Holding NV rose 7.2 percent after the company raised its forecast for bookings in the fourth quarter.
The benchmark Stoxx Europe 600 Index gained 1.9 percent this week, extending a 1.6 percent advance last week. It’s the first five-day up week since June for the European benchmark. The gauge has rallied 8.8 percent this year as corporate profits climbed, the Federal Reserve unveiled a $600 billion bond-purchase program to assist the U.S. economic recovery and the European Union bailed out Greece and Ireland.
“In the mid-term it makes sense to be invested in equities, especially European ones,” said Markus Steinbeis, head of equity portfolio management at the Unterfoehring, Germany-based unit of Pioneer Investments KGmbH, which oversees about $221 billion globally. “The valuation of the market is reasonable. We should see positive returns in 2011 but volatility will remain.”
European equities will climb 12 percent through the end of 2011 as rising earnings and record-low interest rates help companies overcome the sovereign-debt crisis, a Bloomberg survey of 13 strategists shows. Goldman Sachs Group Inc., the most bullish forecaster, says the Stoxx 600 will rally 20 percent because profits may expand twice as fast as the 14 percent average rate in more than 26,000 analyst estimates compiled by Bloomberg.
Federal Reserve Chairman Ben S. Bernanke said the economy is barely expanding at a sustainable pace and that it’s possible the Fed may expand bond purchases beyond the $600 billion announced last month to spur growth.
The purchase of more bonds than planned is “certainly possible,” Federal Reserve Chairman Ben S. Bernanke said in an interview broadcast by CBS Corp.’s “60 Minutes” program. “It depends on the efficacy of the program” and the outlook for inflation and the economy.
European finance ministers ruled out immediate aid for Portugal and Spain or an increase in the 750 billion-euro ($999 billion) crisis fund, counting on European Central Bank bond purchases to calm debt-spooked markets. German Chancellor Angela Merkel and French President Nicolas Sarkozy said they oppose increasing the rescue fund and also rejected joint euro-area bonds.
In the U.K., a report showed manufacturing expanded in October twice as much as economists forecast, a sign that the economic recovery maintained its momentum into the final quarter of the year. In Germany, Europe’s largest economy, industrial production rose almost three times as much as economists forecast in October, led by demand for investment goods such as machinery.
Fewer Americans filed first-time claims for unemployment insurance payments last week, showing the labor market is continuing to improve. Meanwhile, President Barack Obama said he will agree to keep Bush-era tax cuts for high-income taxpayers in exchange for extending federal unemployment insurance and cutting the payroll tax by $120 billion for one year.
Confidence among U.S. consumers increased more than forecast in December to the highest level in six months at the same time Americans began stepping up holiday spending. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 74.2 from 71.6 at the end of November. Economists projected a December reading of 72.5, according to the median estimate in a Bloomberg News survey.
National benchmark indexes rose in all 18 western European markets, except Finland and Sweden. France’s CAC 40 Index surged 2.9 percent. The U.K.’s FTSE 100 Index gained 1.2 percent, while Germany’s DAX Index rallied 0.8 percent. Portugal’s PSI 20 Index and Ireland’s ISEQ Index posted the best performances, both rising more than 3 percent.
European insurance companies posted the best performance among 19 industry groups, rising 4.7 percent. Prudential surged 9.7 percent as UBS added the stock to its European “key calls” list.
S&P yesterday lifted its outlook on U.S. life insurers to “stable” from “negative,” saying the industry may sidestep downgrades next year after raising funds in stock and bond sales. Zurich Financial Services AG, Switzerland’s largest insurer, climbed 4.4 percent, while Axa SA, France’s biggest insurer, advanced 8.1 percent.
Bank of Ireland Plc surged 21 percent, extending last week’s 22 percent rise. Irish Finance Minister Brian Lenihan won the backing of lawmakers in the first votes on his 6 billion-euro budget to tackle what he called the “worst crisis in our history.”
Separately, J. Christopher Flowers, founder of New York-based private equity firm J.C. Flowers & Co., signaled he is continuing to look for Irish banking assets.
“If we can find the right opportunity to invest in Ireland, we would like to do that,” he said in an interview.
Alstom SA surged 9.2 percent, the biggest weekly gain since July 2009, as the world’s third-largest power-equipment maker said it has signed a long-term cooperation agreement with China’s rail ministry to develop rail infrastructure in the world’s second-biggest economy and some international markets.
Burberry, the U.K.’s largest luxury retailer, rose 2.7 percent on speculation that PPR SA, the French owner of the Gucci and Puma brands, may make a bid.
“There have been reports that PPR was close to an agreement with Steinhoff to sell Conforama,” said Peter Farren, an analyst at Bryan Garnier & Co. “That would fuel speculation on Burberry.” Charlotte Judet, a spokeswoman for PPR, declined to comment.
PPR said Dec. 6 it’s in talks with “various” investors about the sale of its Conforama unit, including Steinhoff International Holdings Ltd., Africa’s largest furniture maker.
ASML increased 7.2 percent as Europe’s biggest semiconductor equipment maker said it now expects bookings to be more than 2 billion euros.
Hochtief AG increased 8.1 percent as the Financial Times Deutschland reported that potential new investor Qatar Holding LLC plans to increase its stake in the German construction company above the announced 9.1 percent.
Deutsche Postbank AG lost 7.2 percent. The retail lender’s stock will leave Germany’s MDAX benchmark index for medium-sized companies on Dec. 8 after its proportion of shares trading freely dropped below 10 percent.
Carmakers posted the worst performance as China said it may end tax incentives for buying passenger cars next year. Volkswagen AG, Europe’s largest carmaker, slumped 4.6 percent, while Bayerische Motoren Werke AG, the world’s biggest maker of luxury cars, dropped 1.8 percent.
Fiat, De La Rue
Fiat still advanced 6.7 percent as Mediobanca Securities maintained its “outperform” recommendation for the carmaker, saying “the separation between Fiat auto and Fiat industrials could trigger M&A appetite.”
Italian daily MF reported that Agco Corp. is interested in buying Fiat’s tractor-making unit, CNH Global, citing Chief Executive Officer Martin Richenhagen.
De La Rue Plc jumped 29 percent, the biggest weekly gain since 2002. The world’s biggest printer of banknotes rejected an 896 million-pound ($1.4 billion) takeover approach from closely-held rival Francois-Charles Oberthur Fiduciaire SA.