European Stocks Rebound as China Allays Crunch Concern
European stocks climbed from a six-month low as the People’s Bank of China allayed concern over a cash crunch, and as U.S. data on durable goods, new-home sales and confidence increased more than economists had projected.
PSA Peugeot Citroen rose 4.9 percent after saying it received more than 26,000 orders for its 2008-model crossover in Europe. Vinci SA rose 3.9 percent after Berenberg Bank initiated coverage of the stock with a buy rating. ARM Holdings Plc (ARM) gained 3.6 percent as Investec Plc recommended buying the shares.
The Stoxx Europe 600 Index increased 1.5 percent to 279.69 at the close of trading, its biggest gain in two months. The benchmark gauge entered a correction yesterday, having slumped more than 10 percent since May 22, when Federal Reserve Chairman Ben S. Bernanke commented on the possibility of paring bond purchases. It has dropped 4.8 percent this quarter, the most since September 2011.
“We’ve been risk-off since April, so at this moment it becomes more about when you go in and buy,” Fredrik Nerbrand, London-based head of asset allocation at HSBC Holdings Plc, told Anna Edwards and Mark Barton on Bloomberg Television. “Before I can even contemplate adding risk, I need to see some stabilization in markets, and that’s going to be on the back of a more stable growth outlook. That will take some time.”
The Stoxx 600 is heading for a loss this month of 7 percent, its biggest monthly drop since August 2011 and the worst June in five years.
China’s stocks fell after posting the biggest swings in 22 months as the Shanghai Composite Index reached a four-year low and investors speculated the government will take steps to bolster financial markets.
China’s central bank said it will keep money-market rates at a “reasonable” level and seasonal forces that have driven them up will fade.
The People’s Bank of China has provided liquidity to some financial institutions to stabilize money market rates and will use short-term liquidity operation and standing lending facility tools to ensure steady markets, according to a statement posted to its website today.
Orders for U.S. durable goods rose more than forecast in May. Bookings for goods meant to last at least three years climbed 3.6 percent, after increasing a revised 3.6 percent the prior month, the Commerce Department reported today in Washington. The median forecast of 81 economists surveyed by Bloomberg called for a 3 percent increase.
Sales of new U.S. homes also climbed more than estimated in May, to the highest level in almost five years. Purchases (NHSLTOT) rose 2.1 percent to an annualized pace of 476,000 homes, exceeding all estimates in a Bloomberg survey and the most since July 2008, the Commerce Department said today in Washington.
The Conference Board’s index of U.S. consumer confidence increased to 81.4 in June from 74.3 a month earlier, data from the New York-based private research group showed today. The median forecast of 77 economists surveyed by Bloomberg called for a reading of 75.1.
Richard Fisher, president of the Federal Reserve Bank of Dallas, and Minneapolis Fed President Narayana Kocherlakota late yesterday emphasized that the central bank’s monetary policy remains accommodative.
The two presidents, who differ over the need for more stimulus, will vote next year on the Federal Open Market Committee, when the members may decide when to end asset purchases.
European Central Bank President Mario Draghi said the euro-area economy still requires a loose monetary policy from the central bank.
“Price stability is assured, and the overall economic outlook still warrants an accommodative stance,” Draghi said in a speech today in Berlin. “We expect that monetary stimulus and improvements in financial markets will support a recovery later in the year.”
National benchmark indexes rose in all of the 18 western European markets except Italy. The U.K.’s FTSE 100 added 1.2 percent, while France’s CAC 40 advanced 1.5 percent. Germany’s DAX increased 1.6 percent.
The volume of shares traded on companies listed in the Stoxx 600 was 12 percent greater than the average of the last 30 days, according to data compiled by Bloomberg.
Peugeot rallied 4.9 percent to 6.11 euros, its biggest gain in more than a month. Europe’s second-largest carmaker said it has received more than 26,000 orders in Europe for the 2008-model crossover. Peugeot is betting that the new 208 compact city car and the 2008, a derivative of that vehicle, will help it keep market share in Europe.
Fiat SpA rose 3 percent to 5.49 euros and Renault SA increased 6.3 percent to 53.53 euros, for its largest advance since Feb. 14. A gauge of auto companies climbed the most since November and was the biggest gainer of the 19 industry groups on the Stoxx 600.
Vinci rose 3.9 percent to 37.60 euros. Berenberg initiated coverage of Europe’s largest builder with a buy rating, saying that the company’s size, balance sheet and technical expertise give it a competitive advantage over its European peers.
ARM, whose chip designs power Apple Inc.’s iPhone and iPad, added 3.6 percent to 786 pence. Investec upgraded the company to buy from hold, citing the stock’s recent decline. The shares are still 28 percent below their high in May.
Icade SA (ICAD) advanced 3.1 percent to 60.19 euros. UBS AG raised its recommendation on the company to buy from neutral, with analysts led by Kristian Bandy saying the shares look cheap before a court ruling this week on the office landlord’s takeover of Silic SA.
European lenders rose, after the Stoxx 600 Banks Index yesterday dropped to its lowest level since November, with HSBC adding 2.3 percent to 670.6 pence and UBS gaining 2.7 percent to 15.86 Swiss francs. Deutsche Bank AG, Germany’s largest bank, gained 1.3 percent to 32.91 euros.
Rexam Plc, a maker of beverage cans, fell 2.5 percent to 453.7 pence after saying that full-year results will be lower than it previously estimated.
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