European Stocks Rise on Signs of Compromise on U.S. Debt
European stocks rose the most in more than five weeks amid signs U.S. lawmakers will agree on a compromise deal to avoid an unprecedented default.
Ladbrokes Plc rallied to a two-week high after a report that Playtech Plc founder Teddy Sagi may have acquired an almost 3 percent stake in the bookmaker. CGG gained 2.1 percent after saying third-quarter vessel-production rate jumped to a record. Rheinmetall AG declined after Moody’s Investors Service lowered its debt rating.
The Stoxx 600 added 1.7 percent to 310.29, its highest level since Sept. 2, as U.S. President Barack Obama prepared to meet Republican lawmakers to discuss the federal budget and debt limit. The benchmark gauge yesterday declined for a third day amid concern that the impasse may lead to a default.
“It’s very important for the markets that we got this news of a possible short-term deal and that Republicans and Democrats are having further discussions,” Andreas Lipkow, a senior market strategist at Kliegel & Hafner AG in Berlin, said by telephone. “The tone earlier this week was very negative and everyone was very concerned.”
The VStoxx Index, which measures the volatility that options traders expect in the Euro Stoxx 50 Index, tumbled 15 percent, the most in 13 months. The volume of shares changing hands on Stoxx 600-listed companies was 22 percent greater than the average of the past 30 days, data compiled by Bloomberg showed.
House Republican and Senate Democratic leaders are open to a short-term increase in the $16.7 trillion debt limit, said congressional aides of both parties who spoke on condition of anonymity. Economists say a failure by the world’s largest borrower to repay its debt will devastate stock markets and throw the U.S. and world economies into a recession.
House Republican leaders are presenting their members with a proposal to raise the debt limit for six weeks without policy conditions, said a congressional aide familiar with the details. The move would lessen the risk of a U.S. default one week from a lapse in borrowing authority.
The U.S. government is in its 10th day of a partial shutdown and has just a week before the government’s borrowing authority lapses Oct. 17. Obama meets with 18 House Republican leaders and committee chairmen at 4:35 p.m. in Washington.
In Europe, the Bank of England left its benchmark interest rate unchanged today. Reports showed industrial output in France rose 0.2 percent in August, the first increase in four months. That fell short of the median estimate of economists surveyed by Bloomberg News, which forecast a 0.6 percent gain. A similar measure of output in Italy dropped 0.3 percent in August. Economists had projected a 0.6 percent increase.
National benchmark indexes advanced in all 18 western European markets. The U.K’s FTSE 100 rallied 1.5 percent, France’s CAC 40 jumped 2.2 percent and Germany’s DAX climbed 2 percent. Spain’s IBEX 35 (IBEX) surged 2.4 percent to its highest level since July 2011.
Ladbrokes (LAD) rallied 2.9 percent to 185 pence, posting the biggest two-day gain since April 2009. A mystery buyer, thought to be Sagi, bought a stake in the U.K. bookmaker, the Telegraph reported. The deal, through Shore Capital, was just below the 3 percent disclosure limit, according to the Telegraph. The purchase fueled speculation about a possible bid, the newspaper said.
CGG jumped 2.1 percent to 15.83 euros. The oilfield surveyor said third-quarter vessel-production rate increased to 94 percent, from 90 percent in the same quarter last year and 92 percent in the second quarter of this year.
A gauge of bank shares in the Stoxx 600 rallied 2.5 percent. Commerzbank AG added 5.9 percent to 9.36 euros. Banco Popolare SC rallied 1 percent to 1.40 euros, while Intesa Sanpaolo SpA jumped 2.2 percent to 1.78 euros.
Arkema SA (AKE) added 4.7 percent to 83.93 euros. UBS AG raised its rating on the French chemicals maker to a buy from neutral, saying the stock is undervalued. The firm also boosted its price target to 100 euros from 80 euros.
Hays Plc gained 2.2 percent to 118.1 pence. The U.K’s largest professional-recruitment agency said first-quarter net fees rose 2 percent from last year on a comparable basis.
“We see clear growth opportunities as a number of markets continue to improve, including some that have been challenging for some time, such as the U.K. and Asia,” Chief Executive Officer Alistair Cox said in a statement.
Mediaset SpA rallied 5 percent to 3.47 euros. HSBC Holdings Plc lifted its price target on the broadcaster controlled by former Italian Prime Minister Silvio Berlusconi to 2.60 euros from 1.50 euros. The firm maintained its underweight recommendation, which is similar to sell.
Rheinmetall declined 0.9 percent to 42.38 euros. Moody’s lowered its rating on the German armored-vehicle maker’s senior unsecured notes due September 2017 to Ba1 from Baa3.
Gerresheimer AG dropped 3.4 percent to 43 euros. The company, which develops and produces specialty products made of glass and plastic, was cut to hold from buy at Kepler Cheuvreux.
“The key test for the stock will be the guidance for 2014,” analyst Oliver Reinberg wrote in a note to clients.
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