European stocks climbed to a five-month high, led by a rally in banks, as Greece bargained with bondholders over debt relief and Germany floated the idea of combining Europe’s two rescue funds.
UniCredit SpA and Commerzbank AG both jumped at least 10 percent after a report that a broad agreement on Greece’s debt has been reached. Outokumpu Oyj surged 18 percent as Finland’s biggest stainless-steel maker held discussions that may lead to a merger with a unit of ThyssenKrupp AG. Cable & Wireless Worldwide Plc rallied 34 percent.
The Stoxx Europe 600 Index added 0.5 percent to 257.01 at the close of trading as the region’s finance ministers began meeting in Brussels to discuss the debt crisis. The gauge has risen 5.1 percent in 2012, the best start to a year since 1997, as reports added to optimism that the global economy is strengthening.
“We are still very much in the hands of politicians and regulators and the statements that come out from them,” Nigel Bolton, head of European equities at BlackRock International Ltd., said in an interview with Bloomberg Television. “We are coming up to another summit. As long as we see the continuation of the progress that we started to see at the end of November, then I think the market can continue higher.”
National benchmark indexes rose in 15 of the 18 western European markets today. France’s CAC 40 and Germany’s DAX each gained 0.5 percent, while the U.K.’s FTSE 100 increased 0.9 percent. Greece’s ASE jumped 5.1 percent, the biggest advance in three months.
European Union finance chiefs started discussing the region’s rescue funds, Greece’s latest offer to bondholders, a German-inspired deficit-control treaty and nominees to the European Central Bank’s board today.
France’s Finance Minister Francois Baroin said at a press conference in Paris that negotiations on Greek debt are making “tangible progress.” German Finance Minister Wolfgang Schaeuble said he’s confident the discussions will be completed.
Bondholders negotiating the debt swap said they made their “maximum” offer, leaving it to the EU and International Monetary Fund to decide whether to accept the deal, said Charles Dallara, who’s representing private creditors in the talks. Dallara, managing director of Institute of International Finance, said he’s hopeful the EU an IMF will agree to terms for private investor involvement in a rescue of Greece to avert a default and collapse of the economy.
Financial Times Deutschland reported that negotiators for Greece and the IIF have broadly agreed on the terms of a debt swap, citing unidentified government officials. The parties are still trying to agree on coupons, the newspaper said.
Stocks extended gains as Christian Democratic Union lawmaker Norbert Barthle said the German government is discussing proposals to run the temporary and permanent European rescue funds in parallel if needed. Such a step would boost Europe’s unspent crisis-fighting capacity to around 750 billion euros.
European equity valuations have fallen to the lowest levels since 2004 compared with the U.S., as economic forecasts between the two regions diverge by the most since 1998. The Stoxx 600 trades at 1.43 times book value, or assets minus liabilities, after falling 11 percent last year. The Standard & Poor’s 500 Index trades at 2.14, according to data compiled by Bloomberg.
UniCredit, Italy’s biggest bank, rallied 10 percent to 3.66 euros while Banca Monte dei Paschi di Siena SpA, the nation’s third-biggest, surged 14 percent to 26.23 euro cents and Intesa Sanpaolo SpA climbed 5.4 percent to 1.46 euros.
UBS AG wrote in report dated yesterday that Italian banks were more positive than expected and “far more confident than a year ago” after a conference held in Milan last week.
Elsewhere, Commerzbank gained 13 percent to 1.95 euros in Frankfurt trading. Societe Generale SA climbed 8.6 percent to 22.80 euros in Paris, a tenth day of gains for the longest winning streak since March 2009.
Outokumpu jumped 18 percent to 7.97 euros as ThyssenKrupp said it’s in talks to merge its Inoxum stainless steel unit with the Finnish company. All options for the unit are still open, including an initial public offering, spinoff or a sale to an investor, ThyssenKrupp said.
ThyssenKrupp, Germany’s largest steelmaker, rallied 2.6 percent to 21.26 euros.
Cable & Wireless Worldwide, which provides telecommunications services to the U.K. police force, surged 34 percent to 23.9 pence. That’s the biggest gain since the shares started trading in March 2010.
GDF Suez SA led utilities lower, falling 3.6 percent to 20.36 euros, as Barclays Plc wrote in a report that renegotiated contracts with Russia’s OAO Gazprom may be unprofitable in 2013.
RWE AG declined 2.4 percent to 26.29 euros and EON AG slid 2.2 percent to 15.88 euros as Barclays reiterated its “underweight” recommendation on the shares in a separate report, citing growing earnings risks for the German utilities.
Thomas Cook Group Plc dropped 5 percent to 14.25 pence after the Financial Times reported the company’s bookings in the first half of January fell 33 percent compared with the same period last year. The newspaper cited people with access to a leisure-industry gauge of bookings.
Afren Plc dropped 5.4 percent to 117.9 pence after the U.K. energy explorer focused on Africa and Middle East lowered its output guidance for this year and after delays to its project in Iraqi Kurdistan.