European Stocks Advance on German Court, Fed Speculation
European stocks climbed as Germany’s top constitutional court said it will proceed with a ruling on the country’s role in the euro-area bailout fund and speculation grew that the Federal Reserve will boost stimulus.
Deutsche Bank AG (DBK), Europe’s biggest lender by assets, advanced 4.1 percent after saying it will cut jobs and review pay practices to boost profitability. IG Group (IGG) Holdings Plc jumped 6.5 percent after saying first-quarter sales were in line with forecasts. Burberry Group Plc plunged by a record 21 percent after forecasting full-year profit will be at the lower end of analyst estimates.
The benchmark Stoxx Europe 600 Index added 0.3 percent to 272.58 at the close of trading, the highest level in three weeks. The measure has surged 11 percent this year as European Central Bank policy makers agreed on an unlimited bond-buying program and speculation grew that the Fed will announce a third round of quantitative easing.
“Central banks seem to be more committed to do what it takes to provide the stimulus required both in Europe and the U.S.,” said Henk Potts, an equity strategist at Barclays Plc’s wealth-management division in London, which oversees $239 billion. “We expect to see a commitment to another round of QE from the Fed.”
The Fed will give its latest policy statement on Sept. 13, following a two-day Federal Open Market Committee meeting. On Aug. 31, Chairman Ben S. Bernanke said the U.S. central bank will provide further stimulus as needed to cement a recovery, citing his concern about the jobless rate.
Tomorrow, Germany’s Federal Constitutional Court in Karlsruhe will decide whether to halt the country’s participation in the 500 billion-euro ($640 billion) European Stability Mechanism, the euro area’s permanent bailout fund. A bid by German lawmaker Peter Gauweiler to get the hearing delayed after the ECB pledged unlimited funds to buy government debt failed today.
“The market expects a lot from the decisions this week by the German court and the Fed,” said Pierre Mouton, a portfolio manager who helps oversee $6 billion at Notz Stucki & Cie. in Geneva. “The German court will probably approve the draft with restrictions.”
Parliamentary elections are due to be held in the Netherlands tomorrow, and euro-area finance ministers are meeting in Cyprus on Sept. 14.
National benchmark indexes rose in 15 of the 18 western European markets. France’s CAC 40 advanced 0.9 percent and Germany’s DAX Index rallied 1.3 percent. The U.K.’s FTSE 100 was little changed.
Billionaire investor George Soros said German-led austerity demands worsen the debt crisis and risk pushing Germany into a depression that’s already taking hold of the euro area’s rim.
A policy of fiscal retrenchment “is pushing Europe into a deeper and longer depression,” Soros said during a speech in Berlin yesterday. “The German public doesn’t yet feel it and doesn’t quite believe it, but it’s all too real in the periphery and it will reach Germany in the next six months or so. My message is that the looming depression is largely self-inflicted and the nightmare can be escaped.”
Deutsche Bank gained 4.1 percent to 33.15 euros after saying it plans to cut costs by 4.5 billion euros to help boost after-tax return on equity to at least 12 percent by 2015 from 8.2 percent in 2011. The lender will reduce headcount by more than the 1,900 jobs it had announced in July, co-Chief Executive Officer Juergen Fitschen said.
A gauge of banking shares was the best-performing group in the Stoxx 600. Banco Santander SA (SAN) added 1.8 percent to 6.18 euros in Madrid, while France’s BNP Paribas SA (BNP) climbed 2.2 percent to 39.01 euros. Barclays Plc gained 2.8 percent to 213.5 pence, a four-month high.
IG Group climbed 6.5 percent to 461.7 pence, the largest jump since November. The owner of the IG Index financial spread-betting brand posted first-quarter revenue of 81.5 million pounds($131 million) in the three months ended Aug. 31 and said 2012 sales will be weighted towards the second half.
Fiat SpA (F), Italy’s largest automaker, advanced 1.6 percent to 4.66 euros and Daimler AG (DAI) gained 1.5 percent to 39.36 euros. A measure of auto-industry shares had the second-biggest advance of 19 industry groups in the Stoxx 600.
Burberry (BRBY) plummeted 21 percent to 1,088 pence, the largest decline since its initial public offering in July 2002. Britain’s biggest maker of luxury goods said adjusted pretax profit in the year through March will be at the lower end of analyst estimates, which range from 407 million pounds to 454 million pounds.
Rival luxury-goods companies Hugo Boss AG and Cie. Financiere Richemont SA sank 8 percent to 70.91 euros in Frankfurt and 5.1 percent to 60.85 Swiss francs in Zurich, respectively. Christian Dior SA (CDI) and LVMH Moet Hennessy Louis Vuitton SA (MC) dropped 4.1 percent to 112.50 euros and 3.4 percent to 127.80 euros.
Vestas Wind Systems A/S (VWS), the biggest maker of wind turbines, dropped 6.1 percent to 43.80 kroner. Credit Suisse Group AG said the company may undertake a one-for-one rights offer with a 50 percent discount to the current share price.
A gauge of mining companies dropped the second-most among the 19 industry groups in the Stoxx 600, falling 0.7 percent. Macquarie Group Ltd. cut its forecast for Chinese gross domestic product growth in 2013 to 7.5 percent from 8.1 percent.
Enagas SA (ENG) sank 7.8 percent to 14.52 euros, the biggest drop since 2006, as investor Sagane Inversiones sold a 5 percent stake in the operator of Spain’s natural-gas grid. The shares were sold for 14.70 euros apiece, according to a filing.
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