European stocks climbed to their highest level in 19 months as German business confidence rose more than forecast and optimism mounted that U.S. policy makers will reach an agreement on next year’s budget.
HSBC Holdings Plc advanced 2 percent as European banking shares contributed the most to the benchmark Stoxx Europe 600 Index’s advance. Stada Arzneimittel AG jumped 5.4 percent. Merck KGaA lost 2.1 percent after an experimental drug missed the main goal in a trial with lung-cancer patients.
The Stoxx 600 climbed 0.4 percent to 281.63 at the close of trading. The equity benchmark advanced to its highest level since May 2011 after Standard & Poor’s upgraded Greece’s debt. The gauge has rallied 15 percent this year as the European Central Bank announced an unlimited bond-buying plan and the Federal Reserve began a third round of asset purchases.
“The market is still focused on the fiscal-cliff talks in the U.S., in which investors seem to expect an agreement relatively soon,” said John Plassard, vice president at Mirabaud Securities LLP in Geneva. “News such as the upgrade of Greece’s credit rating is positive, albeit not a big surprise, helping to continue a year-end rally. Sentiment at the beginning of 2013 will be cautious as we face some political risk.”
National benchmark indexes rose in every western-European market except Finland. France’s CAC 40 and the U.K.’s FTSE climbed 0.4 percent. Germany’s DAX gained 0.2 percent. Greece’s ASE rallied 4.8 percent.
The Stoxx 600 rose for the first time in four days yesterday as Obama changed his position on tax increases. That led to optimism U.S. lawmakers will agree on a compromise budget, preventing more than $600 billion of automatic tax increases and spending cuts -- known as the fiscal cliff -- from coming into force at the beginning of next year.
The volume of shares changing hands in the Stoxx 600 was 34 percent greater than the average of the last 30 days, according to data compiled by Bloomberg.
In Germany, the Ifo institute’s business climate index, based on a survey of 7,000 executives, climbed to 102.4 in December from 101.4 in November. That was the second straight increase after sentiment dropped to a 2 1/2 year low in October. Economists had predicted a gain to 102, according to the median forecast of 43 economists in a Bloomberg News survey.
In the U.S., a Commerce Department report showed that housing starts fell to a 861,000 annual rate in November after gaining a revised 888,000 in October. House building missed the median forecast of 85 economists in a Bloomberg News survey. Building permits, a proxy for future construction, rose more than forecast to a 899,000 annual pace.
Greece had its credit rating raised by S&P following the country’s debt buyback. The ratings company cited the determination of euro-area governments to keep Greece in the 17-nation currency zone.
S&P lifted the rating from selective default to B- with a stable outlook, it said in a statement yesterday. The new grade is the highest since June 2011 when the ratings company lowered the country to CCC from B.
HSBC gained 2 percent to 653 pence, contributing the most to the Stoxx 600’s climb. National Bank of Greece SA jumped 10 percent to 1.38 euros.
Stada advanced 5.4 percent to 23.98 euros. Platow Brief reported that India’s Sun Pharmaceutical Industries Ltd. and an unidentified U.S. company may make bids for the German generic-drug maker. Stada declined to comment when contacted by Bloomberg News.
HeidelbergCement AG, the world’s third-largest maker of cement, gained 4.9 percent to 46.24 euros. MainFirst Bank AG raised the stock to outperform from neutral, meaning that investors should buy the shares. MainFirst predicted that the company will regain an investment-grade credit rating next year.
Centrotherm Photovoltaics AG surged 17 percent to 95 euro cents. The German solar manufacturing-equipment maker got a 300 megawatt order for solar-cell production systems from China’s CECEP Solar Energy Technology Co.
Merck fell 2.1 percent to 99.43 euros, dropping for a seventh day, after saying that the drug, formerly known as Stimuvax, failed to significantly improve the survival of patients suffering from lung cancer in a late-stage study of more than 1,500 people.
Bunzl Plc slid 4.3 percent to 1,020 pence. The company acquired McCordick Glove & Safety Inc. in Canada and Atlas Health Care Pty Ltd. in Australia. It didn’t provide any financial details for the two purchases.
Seymour Pierce Ltd. cut the stock to reduce from hold, meaning investors should sell the company’s shares. The brokerage said Bunzl’s results have missed estimates.