European Stocks Gain on Stimulus Optimism; RBS Advances
European stocks rose to the highest this month after the Bank of England announced credit-easing measures, boosting optimism central banks will take steps to stimulate the global economy.
Royal Bank of Scotland Group Plc (RBS) and Barclays Plc (BARC) led a gauge of lenders higher. Carrefour SA (CA) advanced 5.9 percent after agreeing to sell its stake in a Greek joint venture. Imagination Technologies Group Plc (IMG), a U.K. chip designer in which Apple Inc. holds a minority stake, jumped 14 percent.
The Stoxx Europe 600 Index (SXXP) climbed 1 percent to 244.21 in London, the highest since May 29. The benchmark gauge has still declined 10 percent from its high on March 16 amid growing concern that Greece may be forced to leave the euro currency union after the elections on June 17.
“The Greek elections won’t add more clarity for the markets, but a clear positive is that investors increasingly believe that central banks are ready to act after the elections -- whatever the outcome may be,” said Lars Knudsen, a portfolio manager who manages about $95 million at LGT Capital Management in Pfaeffikon, Switzerland. “Markets see a decreasing likelihood of contagion to the euro zone.”
The Stoxx 600 dropped yesterday after Moody’s downgraded Spain and Cyprus, while Switzerland’s central bank said Credit Suisse Group AG must boost its capital this year. European stocks may be more volatile than usual today as futures and options contracts on equity indexes expire in a process known as quadruple witching.
Funding for Lending
BOE Governor Mervyn King said in a speech late yesterday that the case for more stimulus in the U.K. is growing. He also unveiled two plans to improve cash supply to the banking system.
A “funding-for-lending” program will allow banks to swap assets with the BOE for money to be loaned their customers. The central bank will also activate an unused facility to inject at least 5 billion pounds ($7.8 billion) a month into the system at a minimum rate of 25 basis points more than the benchmark interest rate, now at a record low of 0.5 percent.
U.S. stocks extended gains in the final hour of trading yesterday after Reuters reported that central banks will coordinate action, if needed, to boost cash availability in financial markets. The news agency cited officials linked to the Group of 20 nations.
Spokesmen at the European Central Bank, BOE, Bundesbank, Swiss National Bank and Bank of France declined to comment when contacted by Bloomberg News on the prospects for emergency coordinated action.
National benchmark indexes advanced in all of the 18 western-European markets except Iceland. The U.K.’s FTSE 100 added 0.2 percent and Germany’s DAX rallied 1.5 percent. France’s CAC 40 climbed 1.8 percent.
On June 17, almost 10 million Greeks will vote for the second time in six weeks after a May 6 ballot failed to result in a government. The constitution permits a third election too. Exit polls will be released when voting ends at 7 p.m. in Athens.
“It’s not because the elections will have passed that the problem will be resolved,” said Guillaume Duchesne, an equity strategist at BGL BNP Paribas SA in Luxembourg. “What will happen then? If there is a clear coalition of the traditional parties, that will have a positive impact on the market. But we remain cautious.”
European Union leaders will press for new efforts to boost the economy and improve lending conditions, according to a draft document prepared for a June 28-29 summit in Brussels. They will endorse the European Commission’s recommendations on national governments’ budget, employment and other economic policies, the document obtained by Bloomberg showed.
In the U.S., a report showed that industrial production unexpectedly fell in May for the second time in three months.
Output at factories, mines and utilities decreased 0.1 percent last month after a revised 1 percent gain in April, the Federal Reserve said. Economists forecast a 0.1 percent advance, according to the Bloomberg News survey median. Manufacturing, which makes up about 75 percent of total production, dropped 0.4 percent last month.
An earlier report showed manufacturing in the New York region expanded in June at the slowest pace in seven months.
RBS and Barclays rallied 7.9 percent to 247.6 pence and 4.2 percent to 200.8 pence, respectively. A gauge of European lenders was among the best performers among the 19 industry groups in the Stoxx 600. Lloyds Banking Group Plc (LLOY) gained 5.2 percent to 31.30 pence.
Carrefour gained 5.9 percent to 14.49 euros. The world’s second-largest retailer, agreed to sell its stake in a Greek joint venture, reducing its exposure to southern Europe at a cost of 220 million euros ($278 million). Late yesterday, the company announced the purchase of 129 EKI stores in and around the Argentine capital Buenos Aires.
Fiat SpA (F), the Italian carmaker which controls Chrysler Group LLC, jumped 5.5 percent to 3.66 euros. Chief Executive Officer Sergio Marchionne said the company is cutting investments in Europe by 500 million euros ($635 million) on concern the region’s auto market won’t recover in the second half of the year.
Telekom Austria AG (TKA) advanced 1.4 percent to 8.15 euros after America Movil agreed to acquire a 21 percent stake in the company from investor Ronny Pecik. The acquisition is part of America Movil’s strategy to establish a foothold in Europe as the debt crisis lowers the value of telecommunications assets.
Imagination Technologies jumped 14 percent to 499.5 pence, the biggest jump since May 10 and the best performance on the Stoxx 600 today.
SBM Offshore, Neste
Randgold Resources Ltd. (RRS) climbed 1.4 percent to 5,970 pence as Goldman Sachs Inc. upgraded its recommendation for the stock to neutral, the equivalent of hold, from buy.
Endesa SA (ELE) increased 3.8 percent to 12.87 euros after SSE Plc said it will acquire the Irish power assets of Endesa for 320 million euros.
Roche Holding AG fell 0.4 percent to 156.50 Swiss francs. The company’s Zelboraf skin-cancer treatment failed to win the backing of the U.K.’s health-cost agency, even after the Swiss company offered to cut the drug’s price.
“The longer-term effect on survival was uncertain” because many patients taking an older drug in a study were shifted onto other therapies such as Zelboraf when their disease worsened, making it difficult to compare treatments, the National Institute for Health and Clinical Excellence said.
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