European Stocks Climb, Lifting Stoxx 600 From Seven-Month Low

European stocks gained, rebounding from a seven-month low, as companies from Novartis AG to International Business Machines Corp. reported earnings that beat estimates.

Novartis, Europe’s second-biggest drugmaker by sales, climbed the most in three months. SAP AG led a rally in technology companies after IBM boosted its forecasts. Nordea Bank AB soared 5.7 percent after profit increased. Electrolux AB, the world’s second-biggest appliance maker, plunged the most in four years as results trailed projections.

The Stoxx Europe 600 Index rallied 0.8 percent to 264.28 at the 4:30 p.m. close in London. The gauge has still tumbled 9.2 percent from this year’s high on Feb. 17 amid concern the region’s debt crisis is spreading and U.S. lawmakers may will fail to reach a deal to raise the country’s debt limit. The retreat has left the measure trading at about 12.5 times the reported profits of its companies, near the cheapest since 2008.

“Earnings are not too bad at all,” said Markus Huber, head of German sales trading at ETX Capital in London. “It is doubtful that even if the earnings season continues to go well stocks can break out to the upside as long as uncertainties like the potential default of Greece and the U.S. debt ceiling is not solved. In the short term, however, stocks which beat estimates and raise forecasts should perform well.”

IBM Earnings

IBM, the world’s biggest computer-services company, reported revenue that beat analysts’ estimates and boosted its full-year profit forecast late yesterday as companies bought more software and equipment. Thirty-one of the 36 companies in the Standard & Poor’s 500 Index that have reported results since July 11 topped per-share profit projections, data compiled by Bloomberg show.

President Barack Obama and congressional leaders are making little progress in debt-reduction talks after House Speaker John Boehner said all sides must settle for a smaller plan than the president seeks. Obama is holding his fifth round of public remarks on the debt in a week today as he presses lawmakers to reach an agreement to raise the $14.3 trillion U.S. borrowing ceiling before an Aug. 2 deadline.

European Union government chiefs plan to meet for the second time in a month on July 21, aiming to break a deadlock over a new Greek rescue that has spooked investors. Spanish and Italian bonds yields surged yesterday, piling pressure on officials to end the turmoil. Spain sold 4.45 billion euros ($6.3 billion) of 12-month and 18-month bills today.

U.S. Economy

A report today showed housing starts in the U.S. rose more than forecast in June to the fastest pace in five months. Work began on 629,000 houses at an annual pace, up 14.6 percent from the prior month, figures from the Commerce Department showed today. The level of starts exceeded the most optimistic forecast in a Bloomberg survey of economists.

National benchmark indexes gained in all of the 18 western European markets. The U.K.’s FTSE 100 rose 0.7 percent. France’s CAC 40 and Germany’s DAX advanced 1.2 percent.

Novartis, the second-biggest stock in the Stoxx 600 by weighting, climbed 3.2 percent to 51.05 Swiss francs, the largest gain in since April, as earnings excluding some costs climbed to $3.56 billion, or $1.48 a share. Analysts had forecast profit of $1.44, according to the average of 17 estimates compiled by Bloomberg in the past month.

Technology Shares

Technology stocks were the best-performing group in the Stoxx 600 after IBM’s better-than-estimated earnings. SAP, the world’s biggest maker of business software, gained 1.8 percent to 41.10 euros while ASML Holding NV, Europe’s biggest semiconductor-equipment maker, climbed 3.2 percent to 24.92 euros. Software AG, Germany’s second-biggest software maker, rose the most since January, surging 7.1 percent to 34.13 euros.

Nordea soared 5.7 percent to 66.40 kronor, ending the longest falling streak in four months. The Nordic region’s largest lender posted a 30 percent increase in second-quarter profit as it set aside less money for doubtful loans.

Renewable Energy Corp. ASA climbed 10 percent to 9.14 kroner as the Norwegian maker of solar energy components said second-quarter earnings before interest, taxes, depreciation and amortization rose to 871 million kroner ($157 million) from 455 million kroner a year earlier.

Alfa Laval AB surged 6.5 percent to 139.40 kronor after the world’s largest maker of heat exchangers said second-quarter sales increased 23 percent to 7 billion kronor ($1 billion).

Electrolux plunged 15 percent to 123.10 kronor, the biggest drop since January 2007, after saying second-quarter net income fell to 561 million kronor from 1.03 billion kronor a year earlier. Analysts on average expected profit of 677 million kronor, a survey by Bloomberg showed.

Husqvarna AB tumbled 11 percent to 34.96 kronor as the world’s largest maker of lawnmowers reported second-quarter net income that missed estimates.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE