European Stocks Rise to Highest Level in Two Years; Tesco Climbs
European stocks climbed to their highest level in more than two years after President Barack Obama agreed to extend tax cuts, outweighing concern that Europe’s sovereign-debt crisis will spread further.
Unilever climbed 2.9 percent after Morgan Stanley recommended the shares of the world’s second-largest consumer- goods maker. Antofagasta Plc led commodity companies higher as copper rallied to a record in London. Tesco Plc advanced after the U.K.’s largest supermarket chain posted increased sales as Britons bought more of its Finest range.
The benchmark Stoxx Europe 600 Index increased 0.9 percent to 273.9 at the 4:30 p.m. close in London. The gauge has rallied 7.9 percent this year as corporate profits improved, the Federal Reserve announced a $600 billion bond-purchase program to stimulate the U.S. economy and the European Union bailed out the Greek and Irish economies.
The U.S. tax cut extension “will probably boost the economy,” Matthias Jasper, head of equities at WGZ Bank AG in Dusseldorf, said. “That combined with the Fed flooding the market with liquidity is very positive for equities. The equity markets are poised to go up in 2011 as the risk/reward ratio is positive.”
National benchmark indexes climbed in all 18 western European markets except Norway. The U.K.’s FTSE 100 Index advanced 0.7 percent and France’s CAC 40 Index gained 1.6 percent. Germany’s DAX Index rose 0.7 percent, to its highest level in 2 1/2 years.
Bush Tax Cuts
PresidentObama said he will agree to keep Bush-era tax cuts for high-income taxpayers in exchange for extending federal unemployment insurance and cutting the payroll tax by $120 billion for one year.
Obama said he will accept lower rates on high earners’ income, dividends, capital gains and multi million-dollar estates for the next two years to break the stalemate over extending the Bush administration’s tax cuts for middle-class taxpayers before Congress adjourns.
European finance ministers ruled out immediate aid for Portugal and Spain or an increase in the 750 billion-euro ($999 billion) crisis fund, counting on European Central Bank bond purchases to calm debt-spooked markets.
A week after handing Ireland an 85 billion-euro lifeline, the finance chiefs voiced confidence that Spain and Portugal will tame their budget deficits and said the existing credit line is enough to defend them in an emergency.
Stocks extended gains after a report today showed U.K. manufacturing expanded in October twice as much as economists forecast, a sign that the economic recovery maintained its momentum into the final quarter of the year.
Unilever, Antofagasta Gain
Unilever gained 2.9 percent to 1,906 pence after Morgan Stanley raised its recommendation on the stock to “overweight” from “underweight,” saying “we are very encouraged by Unilever’s slight, but potentially significant, change in its growth strategy.”
Antofagasta, the copper producer controlled by Chile’s Luksic family, rallied 4.9 percent to 1,528 pence. Xstrata Plc gained 1.6 percent to 1,460.5 pence. A gauge of raw-material companies on the Stoxx 600 climbed 1.5 percent, posting the second-biggest increase of the index’s 19 industry groups after construction shares.
BP, Tesco Rise
BP Plc gained 1.1 percent to 455 pence. The company weighed the sale of North Sea assets that may raise as much as $1 billion, according to a person familiar with the matter. BP may sell some fields and infrastructure in the region where it has operated for more than 40 years, said the person, who declined to be identified because the discussions are private and no decision has been reached. Toby Odone, a BP spokesman in London, declined to comment.
Tesco increased 2.4 percent to 430 pence as the U.K.’s largest retailer said third-quarter sales rose 8.8 percent, led by growth abroad. Revenue outside the U.K., excluding gasoline, increased 16 percent in the 13 weeks through Nov. 27 from a year earlier. Sales jumped 39 percent in the U.S., 23 percent in Asia and 5 percent in the domestic market, the company said.
U.K. retail sales climbed in November as higher food-price inflation pushed up prices and cold weather boosted demand for clothing and footwear, the British Retail Consortium said.
Porsche SE gained 4.4 percent to 68.57 euros as Barclays Plc lifted its recommendation on the carmaker to “overweight” from “equal weight.”
Alstom, Hochtief Climb
Alstom SA surged 4.5 percent to 34.09 euros as the world’s third-largest power-equipment maker said it has signed a long- term cooperation agreement with China’s rail ministry to develop rail infrastructure in the world’s second-biggest economy and some international markets.
Hochtief AG climbed 3.4 percent to 64.82 euros. Actividades de Construccion y Servicios SA will continue with its bid for Hochtief even after the German construction company announced a capital increase and the sale of 9.1 percent of its shares to Qatar Holding LLC, Expansion reported, without citing anyone.
Mediaset SpA fell 1.5 percent to 4.43 euros. Credit Suisse Group AG downgraded the broadcaster owned by Italian Prime Minister Silvio Berlusconi to “underperform” from “neutral.” The brokerage cited a disappointing 2010 for pay TV and a sharp decline in free-to-air audience share.
Henkel AG preferred shares lost 2.9 percent to 46.86 euros. The maker of Loctite glues was downgraded to “equal weight” from “overweight” at Morgan Stanley, which said the company “continues to offer strong operational momentum and we still recommend holding the shares, but would look for a more attractive entry point before adding to existing positions.”
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