European stocks advanced as oil fell from a 29-month high, offsetting concern that the European Central Bank will raise interest rates several times this year.
BT Group Plc and Deutsche Telekom AG led a rally in phone companies after Morgan Stanley recommended the industry’s shares. Andritz AG rose 4.6 percent after reporting higher-than-estimated full-year net income. National Bank of Greece SA and EFG Eurobank Ergasias SA both lost more than 6 percent as the yield on Greek 10-year bonds surged to a record.
The benchmark Stoxx Europe 600 Index rose 0.4 percent to 281.81 at the 4:30 p.m. close in London, after earlier falling as much as 0.5 percent. The gauge dropped yesterday as oil climbed above $105 a barrel in New York after forces loyal to Libya’s ruler Muammar Qaddafi repelled a rebel attack on the central city of Sirte.
“We have enormous pressure from the commodity side at the moment,” said Andreas Lipkow, an equity trader at MWB Fairtrade Wertpapierhandelsbank AG in Frankfurt. “The ECB and the Fed have to react right now and have to raise interest rates. Investors are very nervous and the way central banks will formulate the next steps is very important.”
ECB council member Axel Weber said he doesn’t want to correct market expectations for as many as three quarter-point increases this year in the bank’s benchmark interest rate. ECB President Jean-Claude Trichet yesterday said that the world’s central bankers are united in their aim to prevent surging oil prices from fanning broader inflation.
Crude fell in New York after Kuwait’s Oil Minister confirmed that the Persian Gulf country has held talks to boost production. Organization of Petroleum Exporting Countries are holding “consultations” and have yet to decide to raise output, Sheikh Ahmad al-Abdullah al-Sabah said.
National benchmark indexes increased in 13 of the 18 western European markets today. The U.K.’s FTSE 100 Index and Germany’s DAX Index both rose less than 0.1 percent today, while France’s CAC 40 Index gained 0.6 percent.
Telecommunication stocks advanced after Morgan Stanley raised its recommendation on the industry’s shares to “maximum overweight.” BT Group advanced 4 percent to 191.1 pence and Vodafone Group Plc gained 1.8 percent to 181.9 pence.
“Telecoms is our preferred defensive sector as we think it offers greater potential for a positive growth surprise as well as offering a substantial dividend yield boost over other sectors,” strategists led by Morgan Stanley’s London-based head of European equity strategy Graham Secker wrote in a report.
Deutsche Telekom Gains
Deutsche Telekom soared 4 percent to 10.01 euros. Europe’s largest telecommunication company by sales has held talks to sell its T-Mobile USA unit to Sprint Nextel Corp. in exchange for a major stake in the combined entity, said people with knowledge of the matter.
European stocks earlier retreated as Greek government bonds slid, driving the yield on the 10-year security to the highest level since Bloomberg began collecting the data in 1988. The yield jumped as much as 48 basis points to 12.82 percent, while credit-default swaps insuring Greek government bonds rose 5 basis points to an all-time high of 1,037.
National Bank of Greece, Greece’s biggest lender by market capitalization, slid 6.8 percent to 6.15 euros. Eurobank and Alpha Bank SA lost 6.1 percent to 4.30 euros and 4.3 percent to 4.69 euros, respectively. Moody’s Investors Service yesterday downgraded Greece’s government bond ratings to B1 from Ba1, and assigned a negative outlook. The Greek equity market was closed for a holiday yesterday.
Andritz jumped 4.6 percent to 64.38 euros. The Austrian maker of machines for the paper and steel industries reported full-year net income of 179.6 million euros ($249.8 million), beating analysts’ estimates. Andritz also forecast that its 2011 sales will “increase substantially compared to 2010” and that its profit will rise.
Aegon NV rose 1.4 percent to 5.60 euros, erasing yesterday’s decline after Scor SE was said to be in talks to buy Dutch insurer’s Transamerica Reinsurance unit, according to four people with knowledge of the matter.
Scor dropped 2.2 percent to 20.61 euros as the company said that catastrophes in Australia and New Zealand will cost it a total 200 million euros, net of retrocession.
Lundin Petroleum AB surged 4.4 percent to 83.10 kronor after BofA Merrill Lynch Global Research upgraded the company to “buy” from “sell.”
Wacker Chemie AG climbed 2.9 percent to 138.40 euros as UBS AG lifted its recommendation on the chemicals company to “buy” from “neutral.”
Randgold Resources Ltd., a producer of the metal in West Africa, sank 8.2 percent to 4,480 pence, the biggest decline in the Stoxx 600. Ivory Coast President Laurent Gbagbo took control of local purchases and exports of cocoa and coffee, escalating his conflict with rival Alassane Ouattara, the internationally recognized winner of November’s election.