European Stocks Rise to a Six-Month High; Bank Shares Lead Gains

European Stocks Advance as Chinese Manufacturing Expands
A financial trader uses a telephone as he works at his computer screens at the Frankfurt Stock Exchange in Frankfurt. Photographer: Ralph Orlowski/Bloomberg

European stocks advanced to a six-month high, with the Stoxx Europe 600 Index extending its best start to a year since 1998, as gauges of manufacturing increased from America to the euro area to China.

Banks and carmakers led gains. ICAP Plc jumped 7.7 percent after saying annual pretax profit will be at the “upper end” of the range of analysts’ estimates. RWE AG climbed 4.9 percent after Morgan Stanley added the stock to its best ideas list.

The Stoxx 600 rose 2 percent to 259.51 at the close in London, its highest level since August. The benchmark gauge rallied 4 percent last month, the biggest January gain since 1998, as the U.S. economy maintained its recovery and speculation grew that European policy makers will contain the region’s debt crisis.

“U.S. manufacturing data is key,” said Guillaume Duchesne, an equity strategist at BGL BNP Paribas SA in Luxembourg. “Industrial activity is doing well. Jobs data at the end of the week will be important. As long as there are good economic surprises, that will support stocks.”

The Institute for Supply Management’s U.S. manufacturing index rose to 54.1 in January from 53.1 in December, the Tempe, Arizona-based group’s data showed today. Fifty is the dividing line between growth and contraction, and the median forecast in a Bloomberg News survey called for an increase to 54.5.

China, Euro Area

Chinese manufacturing rose last month as the world’s second-biggest economy withstood weaker exports driven by the euro-area debt crisis and a government-induced property slowdown. The official purchasing managers’ index increased to 50.5 in January from 50.3 in December, exceeding the median estimate in a Bloomberg News survey for a reading below 50.

In the euro area, a gauge of manufacturing beat estimates in the first month of 2012. The Markit Economics final purchasing managers’ index rose to 48.8 from 46.9 in the prior month. That surpassed a forecast for 48.7 by 27 economists in a Bloomberg News survey.

A U.K. manufacturing index jumped to an eight-month high in January and unexpectedly returned to growth after a quarter of contraction as production rebounded.

National benchmark indexes rose in 17 of the 18 western European markets. France’s CAC 40 added 2.1 percent. The U.K.’s FTSE 100 climbed 1.9 percent and Germany’s DAX jumped 2.4 percent.

Sweeter Greek Deal

Greek bondholders may get a sweetener tied to a revival in economic growth that would ease the impact of accepting a lower interest rate on new bonds, people with knowledge of the talks said.

Three out of 5 European companies on record are missing profit estimates, according to data compiled by Bloomberg News.

Siemens AG and Ericsson AB are among the 59 percent of Stoxx Europe 600 Index companies reporting earnings that fell short of forecasts during the current quarter, the data show. That’s the worst ratio since Bloomberg started collating estimates in 2006, with 39 percent of companies missing projections in an average quarter.

Bank shares rose 3.8 percent for the best performance on the Stoxx 600. Banco Santander SA, Spain’s biggest lender, advanced 3.6 percent to 6.16 euros. Santander remains Nomura’s preferred Spanish bank, analysts wrote in a note. Nomura maintained its “underweight” position on the country’s lenders. Credit Agricole SA, France’s third-largest bank, rallied 7.4 percent to 5.06 euros.

RWE, Fortum

RWE, Germany’s second-largest utility, added 4.9 percent to 30.68 euros. Morgan Stanley added the shares to its best ideas list, saying the company has a more focused disposal program.

Fortum Oyj, Finland’s biggest utility, gained 6.8 percent to 17.94 euros. The company reported fourth-quarter net income of 421 million euros ($550 million), surpassing analyst estimates of 339 million euros.

BP Plc, Europe’s second-biggest oil company, gained 2.6 percent to 483 pence.

ICAP jumped 7.7 percent to 362 pence. The world’s largest broker of inter-bank transactions said pretax profit for the year ending March 31 will be at the “upper end” of the current range of analyst estimates of 336 million pounds ($528 million) to 358 million pounds. ICAP had said in November it expected full-year profit to be within analysts’ projections at that time of 358 million pounds to 390 million pounds.

Infineon, Yara

Infineon Technologies AG advanced 5.6 percent to 7.37 euros after its operating profit fell less than analysts’ projections. Profit in the fiscal first quarter ended Dec. 31 was 20 percent lower at 141 million euros compared to 177 million euros a year ago, as sales rose 2.6 percent to 946 million euros. Twelve analysts polled by Bloomberg had expected an average operating profit of 127 million euros and sales of 934 million euros.

Yara International ASA gained 4.4 percent to 246.50 kroner. The company bought 16 percent of Burrup Holdings Ltd. for $143 million, increasing its stake to 51 percent. Apache Energy has signed a deal with Yara for 49 percent of the company, Yara said.

Renault SA jumped 4.9 percent to 34.18 euros. Renault-Nissan 2011 global sales rose 10 percent to a record, driven by emerging markets and the U.S., the company said.

Sandvik AB lost 0.6 percent to 99.90 kronor after falling as much as 6.3 percent earlier today. The world’s biggest maker of metal-cutting tools reported fourth-quarter profit that missed analysts’ estimates as the company booked costs related to job cuts.

Net income fell to 731 million kronor ($107 million) from 2.09 billion kronor a year earlier, the company said. Ten analysts on average had estimated profit of 1.19 billion kronor in a Bloomberg News survey.