European Stocks Rise Most Since May 2010 After Short-Selling Ban

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European Stocks Gain
A trader speaks on his mobile phone against a backdrop of the DAX index curve at the Frankfurt Stock Exchange in Frankfurt, Germany. Photographer: Hannelore Foerster/Bloomberg

European stocks climbed the most since May 2010, extending the Stoxx Europe 600 Index’s rally from a two-year low, as France, Spain, Italy and Belgium imposed short-selling bans.

A gauge of European banks increased 4.3 percent, for its second day of gains, as Dexia SA surged 17 percent and Barclays Plc soared 5.3 percent. Aker Solutions ASA, Norway’s biggest maker of oil rigs, declined 5.3 percent after reporting quarterly earnings that missed the average analyst projection.

The Stoxx 600 jumped 3.7 percent to 237.49 at the 4:30 p.m. close in London as more than 30 stocks rose for every one that fell. Even so, the benchmark measure dropped 0.6 percent this week. The gauge has decreased 18 percent from its high this year on Feb. 17.

“The ban will cause a short-term rally,” said Manish Singh, head of investment at Crossbridge Capital in London, which has about $2 billion under management. “The authorities can ban short-selling, but they can’t ban the spate of bad news on the economy from hitting the tape. A robust response that addresses long-term structural concern is needed to restore confidence to the markets.”

France, Spain, Italy and Belgium imposed bans on short-selling from today to stabilize markets after Societe Generale SA dropped to its lowest price since March 2009 on Aug. 10.

National benchmark indexes advanced in every western European market. France’s CAC 40 Index rose 4 percent. The U.K.’s FTSE 100 Index gained 3 percent and Germany’s DAX Index climbed 3.5 percent.

Short-Selling Ban

National regulators imposed the bans “to restrict the benefits that can be achieved from spreading false rumors or to achieve a regulatory level playing field,” the European Securities and Markets Authority, which coordinates the work of national regulators in the 27-nation European Union, said in a statement after talks ended late yesterday.

The short-selling ban, “combined with the recent upward momentum we’ve seen, could help ensure we see a slightly less dramatic finish to the week,” said Cameron Peacock, a market analyst at IG Markets in Melbourne. “Although with traders still jittery, any negative news could see people heading for the exit once again.”

French President Nicolas Sarkozy and German Chancellor Angela Merkel will meet in Paris on Aug. 16 after concern that the sovereign-debt crisis will spread to the region’s larger economies rattled the French stock market.

France’s gross domestic product was unchanged from the first quarter, when it rose 0.9 percent, the Insee statistics office said today in Paris. Economists had forecast a 0.3 percent gain, according to the median of 15 estimates in a Bloomberg News survey.

European Industrial Output

Industrial production in the euro area unexpectedly fell in June, led by a drop in capital goods such as machinery, adding to signs the economy is losing momentum as governments struggle to contain the debt crisis.

Production slipped 0.7 percent from May, when it rose 0.2 percent, the European Union’s statistics office in Luxembourg said. Economists had forecast that output to remain unchanged.

A report showed that U.S. retail sales gained 0.5 percent in July, their biggest increase in four months. That matched the median estimate of 81 economists surveyed by Bloomberg News. scheduled for release at 9:55 a.m. New York time may show a drop

A separate report showed that U.S. consumer confidence fell further than expected in August. The Thomson Reuters/University of Michigan index of consumer sentiment declined to 54.9. That missed the median estimate of 69 economists for a reading of 62.

Societe Generale jumped 5.7 percent to 24.30 euros in Paris. Even so, France’s second-largest lender has retreated 11 percent this week.

Dexia, Barclays Advance

Dexia, Belgium’s largest bank by assets, surged 17 percent to 1.80 euros, its biggest gain since March 2009. KBC Groep NV rose 9.6 percent to 20.90 euros. UBS AG, Switzerland’s biggest bank, advanced 5.7 percent to 11.67 Swiss francs, while Barclays jumped 5.3 percent to 187.2 pence. Lloyds Banking Group Plc rallied 5 percent to 33.8 pence. Banco Santander SA, Spain’s largest lender, climbed 6.6 percent to 6.40 euros.

Swiss insurers led a gauge of European insurance companies higher, for one of the best industry performances in the Stoxx 600, a 4.5 percent rally. Zurich Financial Services AG, Switzerland’s largest insurer, surged 7.1 percent to 171.50 Swiss francs and Swiss Life Holding AG soared 7.4 percent to

98.90 francs. CNP Assurances rose 8.2 percent to 12.30 euros, while Allianz SE, Europe’s biggest insurer, climbed 5.3 percent to 76.51 euros.

Aegon Shares Rally

Aegon NV, the Dutch owner of U.S. insurer Transamerica Corp., rallied 8.8 percent to 3.11 euros. Moody’s Investors Service raised its outlook for the company to “stable” from “negative.”

SMA Solar Technology AG rallied 18 percent to 73.10 euros after the company confirmed its outlook for the second half, saying it sees the conditions for a significant increase in global demand.

The stock was raised to “buy” from “sell” by Alla Gorelova, an analyst at Wolfgang Steubing AG.

Meyer Burger Technology AG, the biggest maker of solar-panel manufacturing equipment, surged 6.2 percent to 28.95 francs, while Renewable Energy Corp. ASA, the Norwegian maker of solar-energy components, climbed 11 percent to 9.30 kroner.

Aker Solutions, Fugro

Aker Solutions slid 5.3 percent to 69 kroner after the company reported second-quarter net income of 134 million kroner ($24 million), compared with 445 million kroner a year earlier, missing analysts’ estimates of 389 million kroner.

Fugro NV, the world’s biggest surveyor of deepwater oil fields, slumped 4 percent to 39.65 euros after posting first-half net income of 100.4 million euros ($143 million). That missed the average analyst estimate of 104 million euros.

Of the 276 companies in the Stoxx 600 that have reported earnings since July 11, 47 percent have missed analysts’ estimates for per-share profit, while 44 percent have beaten projections, according to data compiled by Bloomberg. The valuation of Stoxx 600 companies as a multiple of their estimated earnings has slipped to 9.7, near its lowest level since March 2009.

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