European Stocks Post Best Start to Year Since 1998

European Stocks Advance Before ECB Allots Loans
Financial traders work at their desks beneath a display of the DAX Index curve at the Frankfurt Stock Exchange in Frankfurt. Photographer: Hannelore Foerster/Bloomberg

European stocks were little changed, erasing earlier gains, after U.S. Federal Reserve Chairman Ben S. Bernanke failed to signal further monetary easing in a testimony to the Congress.

Hochtief AG shares had their biggest decline in a month after the company suspended its dividend payout. Holcim Ltd., the world’s second-biggest cement maker, climbed as sales and earnings topped forecasts. ITV Plc jumped the most in a year.

The Stoxx Europe 600 Index was unchanged at 264.32 at the close in London. Stocks earlier gained as much as 0.8 percent after the European Central Bank allotted more funds than projected under its long-term refinancing operation. The gauge rallied 3.9 percent in February and 8.1 percent so far this year, the biggest increase in the first two months of a year since 1998.

“While the evolving European developments have the potential to meaningfully impact the direction of markets, our central expectation is for continued uncertainty and associated high volatility in underlying markets,” said Morten Spenner, the London-based chief executive officer of International Asset Management Ltd., which oversees $2.5 billion.

Bernanke said today that keeping monetary stimulus is warranted even as jobless claims fall and rising oil prices may push inflation up temporarily in the world’s largest economy.

Policy makers judge that “sustaining a highly accommodative stance for monetary policy is consistent with promoting both objectives” of the Fed for stable prices and maximum employment, Bernanke said in a testimony to the House Financial Services Committee in Washington.

The Stoxx 600 has rallied 23 percent since last year’s low as the ECB boosted lending to banks at below-market rates and U.S. economic data topped estimates.

ECB Funding

The ECB said today it will lend 800 financial institutions 529.5 billion euros ($712.2 billion) for 1,092 days. Economists predicted an allotment of 470 billion euros, according to the median of 28 estimates in a Bloomberg News survey. Banks borrowed 489 billion euros in the first three-year operation in December.

“It has stopped the fears about systemic risk,” Patrick Legland, head of research at Societe Generale SA, said in a Bloomberg Television interview today, referring to the ECB loan operation. “This is very good. What we need is step two -- additional measures to support the economy.”

The U.S. economy expanded 3 percent, more than forecast, in the fourth quarter as companies rebuilt inventories in anticipation of growing demand.

National benchmark indexes declined in 10 of the 18 western-European markets today. Germany’s DAX fell 0.5 percent, France’s CAC was little changed and the U.K.’s FTSE 100 lost 1 percent.

Fiscal Compact

European Union leaders may consider relaxing budget-deficit targets to take into account economic growth at a summit in Brussels this week, EU Competition Commissioner Joaquin Almunia told reporters in Madrid today.

Of the 229 that have reported quarterly earnings so far, 116 have missed analysts’ estimates, while 101 have beaten them, according to the data.

Hochtief tumbled 5 percent to 52.41 euros after it said it won’t pay a dividend for 2011 and that the pretax profit for last year will be “slightly below” the amount in 2010.

Bouygues SA fell 2.1 percent to 23.88 euros. The French building, television and telecommunications company said revenue this year will fall by 1 percent, led by its mobile-phone business. The company reported a 2011 profit that beat analyst forecasts.

BSkyB, Aberdeen

British Sky Broadcasting Group Plc lost 2.3 percent to 670 pence after its chairman James Murdoch stepped down as executive chairman of News Corp.’s U.K. publishing News International unit. Voice-mail interception by tabloid journalists in the U.K. forced News Corp. to drop its bid for British Sky Broadcasting Group last year. U.K. lawmakers are currently preparing a report about Murdoch’s role in the scandal and may publish their findings in the coming weeks.

Aberdeen Asset Management Plc dropped 5 percent to 240.7 pence. Barclays Plc and Credit Suisse Group AG managed the sale of shares owned by Credit Suisse in the asset manager at 240 pence apiece, according to two people familiar with the offering. The banks were offering as much as 57 million shares in the sale, according to the terms of sale obtained by Bloomberg.

Holcim gained 1.2 percent to 59 Swiss francs. Full-year sales of 20.7 billion Swiss francs ($23.1 billion) beat expectations for a revenue of 20.4 billion francs. Earnings before interest, taxes, depreciation and amortization of 3.96 billion francs topped the forecast for 3.85 billion francs.

Erste Group Bank AG advanced 4.3 percent, the most since Feb. 2, to 18.84 euros as fourth-quarter net income surpassed analyst projections.

Swiss Life added 2.2 percent to 104.30 francs after declaring a full-year dividend of 4.50 francs. The company said it expects to “expand market position.”

ITV climbed 6.8 percent to 85.95 pence, the biggest increase since March 02, 2011. The U.K.’s biggest terrestrial commercial broadcaster reported 2011 profit that beat analysts’ estimates as the company made agreements to offer TV online, expanding services that don’t rely as heavily on advertising.

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