European Stocks Rise Amid Speculation ECB Will Cut Rates
European stocks rose for a fourth day as companies from PSA Peugeot Citroen to Volkswagen AG posted results and speculation mounted that the region’s central bank will cut rates, offsetting worse-than-estimated German business confidence data.
Peugeot surged 10 percent after Europe’s second-biggest carmaker reported first-quarter revenue that beat estimates. Volkswagen added 2.6 percent after retaining its 2013 earnings target. Rio Tinto Group and BHP Billiton Ltd. advanced in line with their European peers as metal prices rebounded in London.
The Stoxx Europe 600 Index (SXXP) gained 0.7 percent to 294.63 at the close of trading. The gauge has rallied 3.8 percent over the past four days as companies from ARM Holdings Plc to Cie. Financiere Richemont SA topped estimates and a contraction in manufacturing and services output fueled speculation the European Central Bank will cut interest rates next week.
“European markets are being supported by expectations of additional ECB stimulus which has helped overcome a slump in Germany’s Ifo confidence index,” said Ioan Smith, a strategist at Knight Capital Europe Ltd. in London. “Earnings expectations had come down a lot, and as ever analysts always overshoot in both directions.”
Economists from Nomura International Plc to UBS AG and Royal Bank of Scotland Group Plc now expect the central bank to cut its key interest rate to a record low as the euro-region economy slumps. Twenty-one out of 36 economists surveyed expect the ECB to cut rates to 0.5 percent, according to estimates compiled by Bloomberg.
German business confidence fell for a second month in April, a report showed today. The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, dropped to 104.4 from 106.7 in March. The median economist forecast in a Bloomberg News survey forecast a decline to 106.2.
National benchmark indexes climbed in all of the 18 western European markets except Ireland. The U.K.’s FTSE 100 increased 0.4 percent, Germany’s DAX rallied 1.3 percent and France’s CAC 40 added 1.6 percent.
The volume of shares changing hands in Stoxx 600 companies was 12 percent greater than the 30-day average, according to Bloomberg data.
Peugeot advanced 10 percent to 6.02 euros, its largest gain since Feb. 22. Europe’s second-biggest carmaker reported a 6.5 percent decline in first-quarter revenue to 13 billion euros ($16.9 billion). That still beat the 12.7 billion-euro average analyst estimate in a Bloomberg survey, as delivery growth in China and Latin America limited the decline.
Volkswagen, Europe’s biggest automaker, added 2.6 percent to 150.70 euros after reporting first-quarter profit that met analysts’ estimates and retaining its 2013 earnings target. Earnings before interest and taxes fell to 2.34 billion euros from 3.17 billion euros a year earlier. Revenue declined 1.6 percent.
Storebrand ASA (STB) rose 6.5 percent to 25.21 kroner after it posted first quarter profit of 357 million kroner ($60.2 million), beating the average analyst estimate of 329.8 million kroner. Norway’s second-largest insurer reported a 29 percent jump in net premium income to 11.2 billion kroner.
Jeronimo Martins SGPS SA (JMT) rallied 6.8 percent to 18.10 euros, its highest price since at least February 1993, after Portugal’s biggest retailer reported first-quarter revenue of 2.77 billion euros, beating the average analyst estimate of 2.71 billion euros. Earnings also exceeded analysts’ forecasts as the company maintained its 2013 outlook.
France Telecom SA climbed 2.7 percent to 8.01 euros. The country’s largest phone company said it will focus on cutting costs this year as competition from Iliad SA forced phone bills down. Earnings before interest, taxes, depreciation and amortization fell 9 percent to 3.12 billion euros.
A gauge of basic resources companies rose the most of the 19 industry groups on the Stoxx 600 as base metals rebounded. Rio Tinto (RIO) added 3.2 percent to 3,000.5 pence. Kazakhmys Plc surged 7.1 percent to 359 pence and BHP Billiton increased 1.8 percent to 1,812.5 pence.
Heineken NV tumbled 5.1 percent to 54.77 euros for the biggest decline on the Stoxx 600. The world’s third-largest brewer reined back its expectations for annual growth after posting an unexpected drop in first-quarter sales.
Finmeccanica SpA (FNC) slid 5.5 percent to 3.97 euros. Italy’s largest defense company reported a loss of 828 million euros last year because of 1.4 billion euros in writedowns on assets, according to a statement yesterday after markets closed. The loss compared with a deficit of 2.3 billion euros a year earlier.
Commerzbank AG sank for a fourth day. Germany’s second- largest lender fell 3.5 percent to 10.40 euros, its lowest price since at least August 1992, as Chief Executive Martin Blessing prepares to carry out the fifth capital increase in four years. The bank plans to increase capital by 2.5 billion euros by the start of June after reducing the number of shares to 583 million from 5.83 billion in a reverse share split yesterday.
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