European Stocks Advance for Ninth Week on U.S. Economy
European stocks rose for a ninth week as U.S. economic data surpassed estimates, outweighing comments by the Federal Reserve and the European Central Bank that disappointed investors looking for more definitive steps to support growth.
Bankia SA (BKIA) posted the biggest gain in the Stoxx Europe 600 (SXXP) Index. Vestas (VWS) Wind Systems A/S rallied 11 percent after saying it has renegotiated its credit lines. Air France-KLM (AF) Group, Europe’s biggest airline, jumped 11 percent after reporting a narrower second-quarter loss.
The Stoxx 600 rallied 2.2 percent to 265.58 this week, its longest stretch of gains since January 2006. The benchmark gauge has climbed 13 percent over the nine-week period as policy makers eased repayment terms for Spanish banks and optimism grew that central banks will announce stimulus measures.
“There were some positive elements” from European Central Bank President Mario Draghi’s statement on Aug. 2, said Guillaume Duchesne, an equity strategist at BGL BNP Paribas SA in Luxembourg. “The ECB has a real will to help, but it’s a long, complex progress. The economic environment remains complex, but the U.S. payroll data is helping the market in the short term.”
Draghi stopped short of unveiling specific steps this week, disappointing investors looking for immediate action. While signaling that the ECB will join forces with governments to buy sovereign bonds, Draghi didn’t detail how the plan will work.
A U.S. report showed nonfarm payrolls in the world’s largest economy climbed more than forecast in July. Employers added 163,000 workers last month, according to the Labor Department. That exceeded the 100,000 median estimate of economists surveyed by Bloomberg News.
Confidence among American consumers unexpectedly rose for the first time in five months, a report on July 31 showed. The Confidence Board’s index increased to 65.9 last month from 62.7 in June. Economists in a Bloomberg survey projected a reading of 61.5.
Fed officials led by Chairman Ben S. Bernanke concluded a two-day meeting on Aug. 1 saying they “will provide additional accommodation as needed” to bolster the expansion. The Federal Open Market Committee also said it will “closely monitor” economic data and financial developments.
National benchmark indexes rose in 16 of the 18 western European markets. France’s CAC 40 Index gained 2.9 percent, the U.K.’s FTSE 100 Index advanced 2.8 percent, while Germany’s DAX Index jumped 2.6 percent.
Bankia, which became Spain’s third-largest lender when seven regional banks were combined, surged 33 percent, leading gains in shares of European lenders.
Vestas jumped 11 percent. The world’s biggest wind-turbine maker allayed investor concern that it may breach its loan covenants, leading to a default scenario. The company said its banks agreed to let it draw on credit lines and defer a test of the covenants.
Air France rallied 11 percent. The company’s operating loss narrowed to 66 million euros ($82 million) from 145 million euros a year earlier, helped by the introduction of a 2 billion- euro savings plan, Air France said on July 30. That beat the 163 million-euro average estimate of analysts in a Bloomberg poll.
A gauge of mining companies advanced 2.3 percent.
Vedanta Resources Plc (VED), the copper producer moving into oil, rallied 6.6 percent after saying on July 31 that fiscal first- quarter profit rose 27 percent as newly acquired Cairn India Ltd. added to gains.
Nokia advanced 12 percent. The stock on Aug. 1 completed its biggest seven-day increase in two decades. Chief Executive Officer Stephen Elop and several directors bought more than $1 million of the shares the previous week, the company said on July 31. Nokia’s surge was also helped by increasing sales of its Lumia smartphone series and speculation of a bid from Lenovo Group Ltd. Reuters on Aug. 1 reported that Lenovo denied it’s in talks to acquire the company.
Xstrata Plc (XTA), the target of a $27 billion takeover bid by Glencore International Plc, gained 6.8 percent. The company on July 31 said first-half production of thermal coal increased 17 percent after restarts and mine expansions.
Hugo Boss AG (BOSS), the German luxury-clothing maker controlled by Permira Advisers, fell 11 percent after the company reported profit margins that missed estimates and sales growth that slowed in Asia.
Ophir Energy Plc (OPHR) tumbled 13 percent, for the worst performance in the Stoxx 600. The U.K. explorer in Africa said on Aug. 2 that a Tanzanian well showed less natural gas than projected.
Spirent Communications Plc (SPT) dropped 11 percent. The company said its growth in the second half may fall to a mid-to-low single-digit percentage increase due to economic uncertainty.
Veolia Environnement SA (VIE), the world’s biggest water company, lost 6.7 percent. The company’s first-half results were hurt by writedowns in Italy, the economic slowdown and a “contractual erosion” at Veolia’s water division in France, the Paris-based company said. Veolia plans to sell 5 billion euros of assets and reduce investment by 500 million euros this year and next.
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