European Stocks Post Fifth Weekly Gain; SBM Shares Surge
European stocks rose for a fifth week, posting the longest stretch of weekly gains in four months, as investors awaited developments in U.S. budget negotiations to avoid automatic tax hikes and spending cuts.
SBM Offshore NV soared 18 percent after seeking to settle a dispute with Talisman Energy Inc. Centamin Plc (CEY) surged 18 percent after the gold producer said operations have resumed at its Sukari mine in Egypt. Royal KPN NV plunged 19 percent as the Dutch phone company partly owned by Carlos Slim’s America Movil SAB cut its dividend.
The benchmark Stoxx Europe 600 Index (SXXP) rose 0.6 percent to 280.95 this week, paring gains after U.S. House Republicans canceled a vote on higher taxes for top earners, fueling concern budget talks will fail. The equity benchmark has rallied 20 percent from this year’s low on June 4 as the European Central Bank and the Federal Reserve introduced bond-buying programs, and U.S. gross domestic product growth beat forecasts.
“The fiscal-cliff discussions are still on track and while there will be moderate risk aversion as U.S. budget talks gyrate, the broad expectation is that there won’t be a disaster,” said Manish Singh, who helps manage $2 billion as head of investment at Crossbridge Capital in London. “What supported sentiment this week was a better-than-expected third- quarter GDP in the U.S. and investors getting excited about Japan again.”
U.S. lawmakers won’t vote on the end-of-year budget until after Christmas, giving them less than a week to reach agreement, after House Speaker John Boehner, a Republican, yielded to anti-tax resistance within his own party and scrapped a plan to allow higher tax rates on annual income above $1 million.
Boehner called upon President Barack Obama and Senate Majority Leader Harry Reid to come up with legislation to avoid the more than $600 billion of tax increases and spending cuts scheduled to start in January. The Congressional Budget Office has said that a failure to avert those changes would probably lead to a recession in the first half of 2013.
A Commerce Department report on Dec. 20 showed that the world’s largest economy grew at a 3.1 percent annual rate in the third quarter, exceeding the highest projection in a Bloomberg survey and the government’s previous forecast of a 2.7 percent gain. The median estimate of economists called for a 2.8 percent advance.
The Bank of Japan this week expanded its asset-purchase fund to 76 trillion yen ($903 billion) from 66 trillion yen and kept its credit-lending program unchanged at 25 trillion yen.
Japan’s Liberal Democratic Party reclaimed power in a landslide victory on Dec. 16. Shinzo Abe’s LDP now has a mandate to implement fiscal and monetary stimulus plans.
SBM Offshore (SBMO) climbed 18 percent, the biggest weekly jump since November 2008. The company will write off the book value of its Yme platform off the coast of Norway, which was evacuated in July after cracks were found. Talisman, operator of the Yme field, had threatened to replace the platform if SBM failed to come up with a plan to repair it.
SBM will also sell a 9.95 percent stake to HAL Investments BV for 8.50 euros a share to bolster finances and meet creditors’ conditions on its loans.
Centamin Plc surged 18 percent after saying normal operations would resume at its Sukari mine after a dispute over diesel supplies that stopped operations. A halt by customs on the mine’s gold exports ended on Dec. 16.
Alcatel-Lucent (ALU) rose 12 percent. The French government wishes to protect Alcatel’s strategic submarine cable unit, Les Echos reported Dec. 20. France Telecom SA is ready to purchase the unit in deal that could give Alcatel 100 million euros ($131.8 million) to 150 million euros, according to the newspaper.
The French phone-equipment maker has rallied 19 percent since the Dec. 13 close after it reached a 1.6 billion-euro financing deal.
KPN (KPN) slumped 19 percent, its lowest price in 11 years. The company cut its dividend as it spent 1.35 billion euros to buy frequencies for faster mobile networks. KPN said Dec. 14 it won’t pay a final dividend for 2012, after its 12-cent interim dividend, and that next year’s payout will be 3 cents a share. That compares with a previous plan to pay 35 cents a share for this year and at least the same amount for 2013.
Aggreko Plc (AGK) sank 17 percent after saying earnings will be lower next year. Chief Executive Officer Rupert Soames said the world’s biggest provider of mobile-power supplies faces the same conditions as in 2008 when it suffered a sharp drop-off in orders for four quarters.
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