Europe Stocks Rise as Germany Open to Spanish Credit Line

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Greece's Prime Minister Antonis Samaras
Greece will soon get its next tranche of bailout, Prime Minister Antonis Samaras said at a conference in Athens late yesterday. Photographer: Chris Ratcliffe/Bloomberg

European stocks rose as two German lawmakers said the country is open to Spain seeking a precautionary credit line from Europe’s rescue fund, and German investor confidence advanced more than expected in October.

BNP Paribas SA and Deutsche Bank AG paced gains among banking shares. Rio Tinto Group rose 2.9 percent after the mining company posted third-quarter iron-ore output that beat analyst projections. GKN Plc fell 3.4 percent after forecasting weaker demand in Europe.

The Stoxx Europe 600 Index climbed 1.3 percent to 274.38 at the close of trading, the first time the benchmark gauge has risen for two straight days since Sept. 12. It has rallied 17 percent from a June 4 low as European Central Bank policy makers agreed on an unlimited bond-buying plan and the Federal Reserve announced a third round of quantitative easing.

European stocks will “stay positive for the rest of the year, with a limited upside of 5-6 percent,” Benoit Peloille, equity market strategist at Natixis, told Maryam Nemazee in a Bloomberg Television interview. “As the political risk premium will be corrected in a few weeks, the markets can re-focus on the growth issue.”

Germany is open to Spain seeking a precautionary credit line from Europe’s rescue fund, two senior coalition lawmakers said. The comments by Michael Meister, a deputy caucus leader of Chancellor Angela Merkel’s Christian Democratic bloc, and Norbert Barthle, her party’s budget spokesman, signal a reversal of Finance Minister Wolfgang Schaeuble’s position that Germany is opposed to a full sovereign bailout for Spain.

‘Possible Move’

Schaeuble said as recently as last month Spain shouldn’t seek aid in addition to its bank bailout. The Mediterranean nation won’t request aid until the terms are clearer, its Prime Minister Mariano Rajoy has said. A precautionary credit line “would be a possible move” for Spain, Barthle said in a text message today.

German investor sentiment improved for a second month in October. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, climbed to minus 11.5 from minus 18.2 in September. Economists forecast an increase to minus 14.9, according to the median of 36 estimates in a Bloomberg News survey.

Greek Finance Minister Yannis Stournaras told lawmakers in Athens today that his country needs a two-year extension to meet its bailout targets. The indebted country sold 1.65 billion euros ($2.15 billion) of 13-week Treasury bills at a yield of 4.24 percent today.

Benchmarks Gain

National benchmark indexes rose in all 18 western European markets except Iceland. The U.K.’s FTSE 100 gained 1.1 percent, Germany’s DAX added 1.6 percent, while France’s CAC 40 climbed 2.4 percent.

European stock holdings climbed to a 20-month high as the so-called U.S. fiscal cliff became a bigger concern for investors than the euro-region debt crisis for a second month, a Bank of America Corp. survey showed. A net 10 percent of money managers, who together oversee $561 billion, are now overweight euro-area equities, according to the survey.

In the U.S., industrial production rose 0.4 percent last month, following a revised 1.4 percent drop in August, a Federal Reserve report showed. Economists had projected a 0.2 percent increase.

A gauge of banking shares was the best performing group among 19 industries in the Stoxx 600. BNP Paribas SA advanced 4.3 percent to 40.70 euros, Deutsche Bank AG increased 5.1 percent to 34.60 euros and Banco Santander SA gained 4.3 percent to 6.06 euros.

UBS Rises

UBS AG added 3 percent to 12.37 francs. Chief Financial Officer Tom Naratil said the Swiss bank fired as many as 550 employees after suffering a $2.3 billion loss from unauthorized trading last year. Naratil testified yesterday at the London trial of Kweku Adoboli, the trader accused of causing the loss.

Rio Tinto climbed 2.9 percent to 3,061 pence after the mining company said iron-ore production rose to 52.6 million metric tons in the three months to Sept. 30, exceeding the average estimate of 50.65 million tons.

Telefonica SA advanced 3.4 percent to 10.52 euros after pricing the shares of its German unit in the range of 5.25 euros to 6.50 euros each.

Bellway Plc jumped 3.2 percent to 980 pence after saying it plans to raise its dividend by 59 percent. The U.K. homebuilder said in a statement annual profit rose 58 percent to 79.3 million pounds ($128 million).

Imagination Climbs

Imagination Technologies Group Plc jumped 7.9 percent to 478.9 pence after Numis Securities raised its recommendation on the shares to buy from hold. Separately, Liberum Capital Ltd. upgraded the stock to hold from sell.

GKN Plc lost 3.4 percent to 204.8 pence after the British maker of car components forecast “softening” demand in some European automotive and industrial markets to have “some impact” on fourth-quarter profit.

A gauge of auto companies in the Stoxx 600 was the worst performing group on the index. European car sales plunged the most in almost two years, with Renault SA and Fiat SpA posting the steepest declines, as demand weakened in Germany.

Registrations plummeted 11 percent to 1.13 million vehicles last month from 1.27 million a year earlier, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today in a statement. It was the 12th consecutive monthly drop and the biggest decline since October 2010.

Renault dropped 1 percent to 35.48 euros and Peugeot SA fell 3.4 percent to 5.80 euros. Fiat fell 0.1 percent to 4.24 euros, after earlier losing as much as 2.5 percent.

Nokian Renkaat Oyj plunged 12 percent to 29.98 euros, the most since December 2008, after the Nordic region’s largest tire maker said second-half operating profit will decline on weak demand and lower prices in Europe.

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