European stocks advanced to a 14-month high after Germany’s top constitutional court cleared the way for the ratification of the euro area’s permanent bailout fund.
BAE Systems jumped the most in nine years after the company began talks with European Aeronautic, Defence & Space Co., for a possible combination. Barratt Developments Plc lost 6.4 percent after the housebuilder said it won’t pay an annual dividend.
The Stoxx Europe 600 Index rose 0.1 percent to 272.91 in London, the highest close since July 8 last year. The Stoxx 600 has advanced 17 percent from its 2012 low on June 4, boosted by speculation central banks will do more to stimulate growth.
“There were no nasty surprises to come out of the German ratification, so the market got the outcome that it wanted,” said James Buckley, a London-based fund manager at Baring Asset Management Ltd. which oversees about $49 billion. “There are still various hurdles to be jumped, but in the near term, the rotation that we are seeing into financials may still have further to go,” he said in a phone interview.
The Stoxx 600 last week surged the most since June as European Central Bank policy makers agreed to an unlimited bond-buying plan to help lower borrowing costs in the region.
The Federal Constitutional Court in Karlsruhe today dismissed motions filed by groups including an opposition political party that sought to halt German ratification of the 500 billion-euro ($640 billion) fund, known as the European Stability Mechanism, and a deficit-control treaty championed by Chancellor Angela Merkel.
The court stipulated that Germany set a cap of about 190 billion euros on its liabilities before ratifying the ESM, unless parliament decides to back extra funds.
BAE jumped 10.6 percent to 363.6 pence, the biggest increase since January 2003. The company said it’s in talks with EADS, the parent of Airbus SAS, about a combination that would create a European counterweight to U.S. companies including Boeing Co.
BAE would own 40 percent of the merged entity, with EADS owning the rest, the London-based company said in a statement responding to a Bloomberg News report that the companies are in talks.
EADS fell 3.9 percent to 28.50 euros, after rising as much as 2.9 percent.
Commerzbank, Germany’s second-largest lender, rallied 7.2 percent to 1.58 euros as a gauge of European banks added 1.3 percent, the biggest advance among the 19 industry groups on the Stoxx 600. France’s Natixis SA jumped 5.2 percent to 2.62 euros, while Credit Agricole SA advanced 5.8 percent to 5.89 euros.
Insurance companies also paced gains in Europe. ING, the largest Dutch financial-services firm, rose 2 percent to 6.80 euros. AXA SA climbed 2 percent to 12.78 euros and Allianz SE, Europe’s largest insurer, added 1.1 percent to 95 euros.
Investors also awaited the outcome of the Fed’s two-day policy meeting tomorrow amid expectations that the central bank will announce a third round of so-called quantitative easing to help support growth, according to almost two-thirds of economists in a Bloomberg survey.
“Again the market is anticipating more QE from the Fed and you can see that in the move from the U.S. dollar. There is potential for some short-term disappointment.”
National benchmark indexes rose in 13 of the 18 western European markets. France’s CAC 40 advanced 0.2 percent, Germany’s DAX Index rallied 0.5 percent, while the U.K.’s FTSE 100 lost 0.2 percent.
Vestas dropped 8.9 percent 39.90 kroner, extending yesterday’s 6.1 percent decline. Sanford C. Bernstein & Co. downgraded the company to underperform, the equivalent of a sell rating, from market-perform.
Martin Prozesky, a London-based Bernstein analyst, also cut his price estimate for the shares by 23 percent to 20 kroner, saying the world’s largest wind-turbine marker is running out of cash.
Barratt Developments lost 6.4 percent to 158.8 pence after the U.K.’s largest housebuilder by volume refrained from paying a dividend. The company was expected to pay investors 0.7 pence a share, according to Bloomberg Dividend Forecasts that account for earnings and options prices. Barratt last paid a dividend in 2008.
The shares fell even after the company posted its first full-year profit since 2008 of 67.4 million pounds ($109 million) compared with a loss of 13.8 million pounds a year earlier. The shares have surged 71 percent so far this year.
Lonmin Plc dropped 5.9 percent to 575 pence after the mining company’s workers refused to return to their jobs and begin wage talks. A strike entered its second month at Lonmin’s Marikana operation, which accounts for about 10 percent of global platinum production.
Novo Nordisk A/S declined 3.2 percent to 896 kroner as Natixis SA reduced its recommendation for the world’s largest insulin maker to neutral from buy.
The volume of shares changing hands on the Stoxx 600 was 65 percent higher than the average of the last 30 days, data compiled by Bloomberg showed.