European Stocks Climb for Second Week; Invensys Soars
European stocks rose for a second week, posting the longest monthly winning streak since 2006, amid optimism that U.S. lawmakers will reach a budget agreement to avoid the so-called fiscal cliff, and after euro-area finance ministers eased the terms of loans to Greece.
Nestle SA (NESN), the biggest member of the Stoxx Europe 600 Index, rose 1.4 percent after it announced a joint-venture to develop intestinal treatments based on Chinese medicines. Invensys Plc, the maker of software for London Underground trains, rallied 41 percent as RBC Capital wrote that the company may be bought after selling its rail unit. Eiffage SA (FGR), which controls France’s APRR toll-road business, added 15 percent.
The benchmark Stoxx 600 climbed 0.9 percent to 275.78 this week, for a monthly gain of 2 percent. The gauge has risen 18 percent from this year’s low on June 4 as the European Central Bank announced an unlimited bond-buying plan and the Federal Reserve started a third round of asset purchases.
“The market was very focused on the political developments in Washington this week,” said Konstantin Giantiroglou, head of investment advisory at Neue Aargauer Bank in Brugg, Switzerland. “The fiscal-cliff issue will lose some importance going forward. Market participants have to some extent adjusted their expectations concerning the outcome of this political wrangle. An accord will be found at the last minute.”
U.S. President Barack Obama and Republican Speaker of the House John Boehner this week fueled optimism an agreement can be reached to avert more than $600 billion in spending cuts and tax increases scheduled to begin on Jan. 1.
Obama reached out to chief executives and middle-income taxpayers, asking them to press Congress to avoid the fiscal cliff, saying he wants to get a deal “done before Christmas.”
Still, Congressional Republicans complained that a plan outlined by Treasury Secretary Timothy Geithner merely rehashed old proposals, setting the stage for contentious negotiations over the coming weeks.
“In the end, they will work something out, but it could be choppy in the shorter term,” Richard Buckland, Citigroup Inc.’s London-based chief global equity strategist, said in a Bloomberg Television interview.
Consumer confidence in the world’s largest economy rose in November to the highest level in more than four years. The Conference Board’s confidence index climbed to 73.7, the highest since February 2008, from a revised 73.1 reading the previous month, a report showed on Nov. 27. That exceeded the median forecast of economists that projected a reading of 73.
In Europe, finance ministers eased the conditions on aid for Greece. In the latest bid to keep the 17-nation euro-area intact, they cut the rates on bailout loans, suspended interest payments for a decade on money from the temporary rescue fund, gave the country more time to repay, and outlined a Greek bond buyback. They cleared Greece to get a 34.4 billion-euro ($44.7 billion) loan instalment in December.
Nestle advanced 1.4 percent. The world’s biggest food company said on Nov. 28 that it will form a joint venture with Hutchison China Meditech Ltd. to develop gastro-intestinal treatments based on traditional Chinese medicines.
Invensys (ISYS) soared 41 percent, posting the best performance on the Stoxx 600 and its biggest weekly rally since at least 1988. The company will probably be acquired after completing the sale of its rail-signaling division to Siemens, RBC said. Invensys on Nov. 28 said it agreed to sell the unit to Siemens for 1.74 billion pounds ($2.8 billion). Siemens advanced 1.3 percent.
Eiffage increased 15 percent. A Paris court dismissed a compliance ruling issued by the markets regulator, AMF, on whether France’s third-largest builder can compulsorily purchase APRR shares. APRR said a share-repurchase offer will open in the next few days.
Porsche SE jumped 7 percent, Bayerische Motoren Werke AG (BMW) gained 3.7 percent and Fiat SpA (F) rose 4.3 percent. A gauge of European carmakers climbed 3.1 percent this week, for the biggest gain of the 19 industry groups in the Stoxx 600. (SXXP)
ThyssenKrupp AG (TKA) slid 7.3 percent. Germany’s largest steelmaker may lose 10 billion euros on the sale of its Steel Americas unit, Sueddeutsche Zeitung reported, without saying where it got the information. ThyssenKrupp has already spent 12 billion euros on the facilities and may get only 2 billion euros to 4 billion euros from their sale, according to the newspaper.
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