European stocks rose to a nine-week high as banks rallied on better-than-forecast profit at Societe Generale SA and Lloyds Banking Group Plc while Chinese manufacturing data boosted mining companies.
Societe Generale climbed the most in 18 months. Lloyds rose to its highest price since October 2010 as it returned to half-yearly profit and said it will start talks with regulators to resume dividend payments. Rio Tinto Group and BHP Billiton Ltd. each added more than 2 percent. Sanofi slid 4.1 percent after cutting its 2013 profit outlook. Royal Dutch Shell Plc retreated the most since August 2011 as profit unexpectedly fell.
The Stoxx Europe 600 Index gained 1.2 percent to 303.29 at the close of trading, its highest level since May 30. The gauge jumped 5.1 percent in July as the Federal Reserve said it stays flexible on the pace of bond buying. The Stoxx 600 trades at a price-earnings multiple of 13.7, its highest since 2009.
“I’m still bullish on European stocks and think they are undervalued,” Herbert Perus, who helps oversee about $36 billion as head of equities at Raiffeisen Capital Management in Vienna, said in a phone interview. “Banks’ earnings today are good, while Shell is a big miss. But as a whole, the earnings season has gone well so far this quarter. The Chinese manufacturing data is also helping the markets.”
The European Central Bank and the Bank of England today left their benchmark interest rates unchanged, as forecast by economist in Bloomberg surveys. ECB President Mario Draghi said indications are that the euro-area economy is stabilizing and the central bank’s rates will remain low for an extended period. The Bank of England’s Governor Mark Carney will present the Monetary Policy Committee’s review of steering policy expectations next week.
The final reading of a euro-area manufacturing gauge, based on a survey of purchasing managers, was for 50.3, Markit Economics said. That beat the initial reading and average economists’ forecast of 50.1 and signals expansion for the first time in two years.
National benchmark indexes advanced in all the 17 western European markets open today. Switzerland was closed for the National Day holiday. The U.K.’s FTSE 100 added 0.9 percent, while France’s CAC 40 gained 1.3 percent. Germany’s DAX climbed 1.6 percent.
Banks and mining companies were the best performers among 19 industry groups in the Stoxx 600. Societe Generale rallied 10 percent to 33.35 euros, the biggest gain since January 2012, after posting second-quarter profit that more than doubled and beat analysts’ estimates.
Lloyds advanced 8.1 percent to 74 pence. Britain’s biggest mortgage lender posted its first profitable six-month period in three years.
“As a consequence of the significant progress made in strengthening the balance sheet, we now expect to commence discussions with our regulators in the second half of this year on the timetable and conditions for dividend payments,” Lloyds said in a statement.
A gauge of commodity producers advanced for the first time in three days. China’s official manufacturing index for July unexpectedly rose to 50.3, compared with economists’ estimates for a drop to 49.8. Another manufacturing gauge released by HSBC Holdings Plc and Markit Economics fell to 47.7, an 11-month low.
Rio Tinto added 2.8 percent to 3,038 pence and BHP rose 2.2 percent to 1,920 pence. Anglo American Plc gained 5.3 percent to 1,483 pence.
Metro AG climbed 8.5 percent to 28.11 euros as Germany’s largest retailer reported second-quarter earnings before interest, taxes and some items of 276 million euros ($366 million). Analysts on average had estimated 269.2 million euros.
Societe Bic SA jumped 6.8 percent to 89.04 euros, its biggest increase since April 2012. The maker of Bic Cristal pens posted first-half revenue of 937.5 million euros, exceeding the 928.8 million euros projected by analysts.
“We are confident that we will achieve our full year 2013 objectives in an environment that remains volatile,” the stationery maker said.
Sanofi tumbled 4.1 percent to 76.85 euros. France’s biggest drugmaker said full-year earnings per share excluding some costs and currency fluctuations may fall as much as 10 percent. It had previously forecast a drop of 5 percent at worst.
Shell lost 4.7 percent to 2,133 pence. Europe’s biggest oil company said second-quarter profit excluding one-time items and inventory changes fell to $4.60 billion from $5.74 billion a year earlier. That missed the average forecast by analysts for a profit of $6 billion.
Aggreko Plc slumped 7.7 percent, the most since December, to 1,643 pence. The world’s largest provider of mobile power generators said the pace of orders at its Power Projects division, which accounts for about 40 percent of revenue, probably won’t pick up in the “immediate future.”
Bayerische Motoren Werke AG dropped 0.8 percent to 73.01 euros. The world’s biggest maker of luxury cars said second-quarter earnings before interest and taxes slid 8.8 percent to 2.07 billion euros. Chief Executive Officer Norbert Reithofer said he doesn’t see the European car market rebounding until the second half of 2014.