European Stocks Post Biggest Weekly Rally of 2012; Xstrata Gains

European Stocks Post Biggest Weekly Rally of 2012
An employee inspects steel rolls at a ThyssenKrupp AG steel plant in Duisburg, Germany. ThyssenKrupp AG, Germany’s largest steelmaker, rose 2.6 percent as it agreed to sell its Inoxum stainless steel unit to Outokumpu Oyj. The deal valued the division at about 2.7 billion euros ($3.5 billion). Photographer: Wolfgang von Brauchitsch/Bloomberg

European stocks posted the biggest weekly gain this year, sending the Stoxx Europe 600 Index to its highest level in six months, as manufacturing increased globally and the U.S. jobless rate fell to the lowest in three years.

Xstrata Plc and Glencore International Plc surged more than 13 percent after the world’s largest publicly traded commodities trader held talks to buy the Zug, Switzerland-based mining company. Temenos Group AG rallied 20 percent as Misys Plc, the British maker of software for banks, said it has held talks about a merger with the Swiss company.

The Stoxx 600 climbed 3.6 percent to 264.6 this past week, extending the January rally of 4 percent that was the best start to a year since 1998. The equity gauge has gained 8.2 percent in 2012 and is up 23 percent since its 2 1/2-year low on Sept. 22.

“We had a very good week,” Veronika Pechlaner, who helps manage 1.1 billion pounds ($1.7 billion) at Jersey, Channel Islands-based Ashburton Ltd., said in a telephone interview. The U.S. employment numbers “are providing more hope to the market that the recovery in the U.S. is not only on track, but maybe accelerating a little bit.”

The Stoxx 600 on Feb. 1 surged 2 percent, the most in six weeks, as gauges of manufacturing increased from the U.S. to China. The Institute for Supply Management’s U.S. manufacturing index rose to 54.1 in January from 53.1 in December, while China’s official purchasing managers’ index increased to 50.5 in January from 50.3 in December.

European Manufacturing

The Markit Economics final purchasing managers’ index, a gauge of manufacturing in the euro area, climbed to 48.8 in January from 46.9 in the prior month. A U.K. manufacturing index also jumped to an eight-month high.

The European stocks gauge rallied 1.7 percent yesterday after U.S. Labor Department figures showed employment climbed more than forecast, with a 243,000 increase in payrolls that was the most since April. The jobless rate unexpectedly fell to 8.3 percent, the lowest since February 2009.

German unemployment also dropped more than economists forecast to a two-decade low in January, the Federal Labor Agency said Jan. 31. The number of people out of work fell a seasonally adjusted 34,000 to 2.85 million for the biggest drop since March. The adjusted jobless rate slipped to 6.7 percent from 6.8 percent.

Portuguese Bonds

European stocks fell the most in six weeks on Jan. 30 as Portuguese bonds sank. Prime Minister Pedro Passos Coelho then said his country’s debt has been judged “perfectly sustainable” by the European Union and International Monetary Fund and that there is no risk of writedowns on the bonds.

EU policy makers agreed on a fiscal-discipline treaty that allows for sanctions on high-deficit states and requires members to enact laws to limit budget shortfalls. They decided to bring the region’s permanent bailout fund, the European Stability Mechanism, into operation on July 1, a year before schedule. The U.K. and the Czech Republic both refused to sign the pact.

Negotiations between Greece and its creditors on the terms of an accord to reduce the country’s borrowings continued all week. 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, according to people with knowledge of the talks.

All 19 industry groups in the Stoxx 600 gained more than 1.2 percent. Automakers and mining companies rose the most, adding 6.6 percent and 6 percent, respectively.

Xstrata, Glencore

Xstrata surged 16 percent and Glencore jumped 13 percent after Glencore held talks to buy the shares in Xstrata that it doesn’t already own to add mines from Africa to Asia. Glencore, which holds a 34 percent stake in Xstrata, said that there’s no certainty it will make an offer.

London-based Anglo American Plc rose 7.8 percent, Nyrstar NV, the world’s largest producer of refined zinc, climbed 5.7 percent and Rio Tinto Group, the third-biggest mining company, gained 4.7 percent.

PSA Peugeot Citroen, Europe’s second-largest carmaker, jumped 13 percent, the biggest gain among carmakers. Renault SA, France’s second-biggest carmaker, gained 8.1 percent. Renault-Nissan 2011 global sales rose 10 percent to a record, driven by emerging markets and the U.S., the company said on Feb. 1.

Volvo AB rose 4.6 percent after the world’s second-largest truckmaker reported fourth-quarter earnings before interest and taxes that increased 26 percent to 6.96 billion kronor ($1.04 billion) from 5.52 billion kronor a year earlier.

Banks Rally

Banks as a group added 5 percent, with Bank of Ireland Plc rising 30 percent for the biggest gain, followed by a 23 percent advance for Banca Popolare di Milano Scarl and an increase of 19 percent for Banco Popolare SC.

Temenos surged 20 percent, the most since October, as Misys said it has held talks with the Swiss software maker about an all-share merger. In a separate statement, Temenos said it is “evaluating its strategic options.” Misys gained 0.8 percent.

ThyssenKrupp AG, Germany’s largest steelmaker, rose 2.6 percent as it agreed to sell its Inoxum stainless steel unit to Outokumpu Oyj. The deal valued the division at about 2.7 billion euros ($3.5 billion).

Outokumpu, Finland’s biggest stainless-steel producer, tumbled 22 percent, the largest decline since 2008.

Repsol YPF SA, the biggest oil company in Spain, fell 3.2 percent. Pagina/12 newspaper said Argentine officials had discussed a takeover of its YPF unit, the South American country’s biggest oil producer.

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