European stocks capped the first weekly gain since mid-March as the International Monetary Fund raised its forecasts for global economic growth, U.S. corporate earnings beat estimates and German business confidence improved.
Hargreaves Lansdown Plc, Britain’s largest retail broker, jumped 13 percent after posting an 11 percent increase in assets under management. Vestas Wind Systems A/S rallied 10 percent on speculation it may be acquired by its Chinese rivals. Repsol YPF SA, the Spanish oil company whose Argentine unit was nationalized, fell 15 percent. Cable & Wireless Worldwide Plc dropped 14 percent after India’s Tata Communications Ltd. decided against making an offer for the U.K. network operator.
The Stoxx Europe 600 Index advanced 1.7 percent to 257.79 this week, after four weeks of losses. The benchmark gauge has climbed 5.4 percent so far this year as the European Central Bank disbursed more than 1 trillion euros ($1.3 trillion) to the region’s financial institutions, U.S. economic reports topped estimates and Greece won a second bailout.
“The market has stabilized after a couple of down weeks,” said Lawrence Peterman, investment director at Eden Financial Ltd. in London. “The earnings coming through positively, both in the U.S. and in Europe, seems to be quite reassuring.”
National benchmark indexes advanced in 13 of the 18 western European markets. The U.K.’s FTSE 100 Index gained 2.1 percent, Germany’s DAX added 2.5 percent and France’s CAC 40 was little changed. Spain’s IBEX 35 Index lost 2.9 percent. The measure closed at the lowest since March 2009 on April 19.
Global Economic Growth
The global economy will expand 3.5 percent this year and 4.1 percent in 2013, the Washington-based IMF said on April 17 in its World Economic Outlook, raising forecasts made in January from 3.3 percent for 2012 and 4 percent for next year.
In the U.S., 80 of the 94 Standard & Poor’s 500 Index companies that reported quarterly earnings since April 10 beat analysts’ estimates, while 13 missed them, data compiled by Bloomberg showed. Microsoft Corp. and General Electric Co. were among the companies that exceeded projections.
In Germany, investor confidence unexpectedly rose for a fifth month in April to the highest in almost two years. The ZEW Center for European Economic Research’s index of investor and analyst expectations, which aims to predict economic developments six months in advance, climbed to 23.4 from 22.3 in March.
Another report on April 20 showed German business confidence unexpectedly rose to a nine-month high in April. The Ifo institute’s business climate index, based on a survey of 7,000 executives, increased to 109.9 from 109.8 in March. Economists had forecast a drop to 109.5.
Spanish Bond Yields
Spanish two-year notes fell for the seventh week, extending the longest run of weekly declines since January 2007, as the Group of 20 nations said the euro-area debt crisis poses a threat to global growth.
Spain tapped the debt markets this week in the face of rising yields. The nation’s Treasury sold 2.54 billion euros of two-year and 10-year bonds at an auction on April 19, meeting the maximum target of 2.5 billion euros. Spain also sold 3.18 billion euros of bills on April 17, compared with a maximum target of 3 billion euros.
“The bond auctions are another piece of the jigsaw, but that situation is not going to go away for the next few months and it will be a drag on markets,” Peterman said.
Non-performing loans for Spanish banks as a proportion of total lending jumped to 8.16 percent in February, the highest level since 1994, from less than 1 percent in 2007, according to Bank of Spain data. The total credit in the economy that the regulator lists as “doubtful” reached 143.8 billion euros.
House prices fell in a record 37 of China’s 70 cities tracked by the national government in March. Foreign direct investment into the country sank for a fifth month, while the economy expanded 8.1 percent in the first quarter, the slowest pace in almost three years.
In the U.K., Bank of England policy maker Adam Posen ended his support for more stimulus to drive the economy, joining the majority of the nine-member Monetary Policy Committee in seeking no change to the 325 billion-pound ($521 billion) asset-purchase target. Minutes of the BOE’s latest meeting showed officials took note of the twin risks of a recession and inflation in the British economy.
In the U.S., a report on April 16 showed that retail sales climbed 0.8 percent in March. The increase was almost three times as large as economists had predicted and followed a 1 percent advance in February.
A Labor Department report showed initial jobless claims fell to 386,000 from a revised 388,000 the previous week that was higher than initially estimated. The median forecast of 47 economists surveyed by Bloomberg News had called for a drop to 370,000.
Hargreaves Lansdown climbed 13 percent after saying assets under management rose 2.6 billion pounds ($4.2 billion) to 26 billion pounds in the three months to March 31. Fiscal third-quarter revenue increased 17 percent from a year earlier to 62.1 million pounds amid fund inflows and recovering markets.
Vestas jumped 10 percent. The shares surged 13 percent on April 16 after Danish newspaper Jyllands-Posten reported that Chinese turbine makers Sinovel Wind Group Co. and Xinjiang Goldwind Science & Technology Co. were considering a bid for the Aarhus, Denmark-based company.
Commodity Shares Gain
Glencore International Plc rallied 5.9 percent, leading a gauge of European commodity companies higher. Xstrata Plc also rose 5.9 percent.
International Power Plc added 3.3 percent after GDF Suez SA agreed to pay 6.4 billion pounds for 30 percent the stake in the U.K. utility that it doesn’t already own.
Repsol, Spain’s largest oil company, plunged 15 percent after Argentine President Cristina Fernandez de Kirchner seized YPF, the Argentine oil company majority-owned by Repsol. Argentina also rejected Repsol’s demand for $10.5 billion in compensation for the unit. S&P lowered the company’s rating to the lowest investment grade.
Cable & Wireless Worldwide tumbled 14 percent after Vodafone Group Plc received an extension of the deadline to make a bid for the company after Tata walked out.
Nokia Oyj declined 8.9 percent for the third successive week of losses, after posting a first-quarter operating loss of 1.34 billion euros, burdened by costs at the unprofitable equipment venture with Siemens AG. Nokia also lost a patent lawsuit over wireless technology that could remove its third-generation handsets from the German market.