European Stocks Climb for Fifth Week as ECB Cuts Rates
Stocks in Europe posted a fifth week of gains, the longest winning streak this year, as the European Central Bank unexpectedly lowered its key interest rate and U.S. economic growth and jobs data beat forecasts.
Commerzbank AG posted the largest advance in three months after reporting third-quarter profit that surpassed analysts’ estimates. ArcelorMittal surged the most in almost two years as earnings increased at the world’s biggest steelmaker. Ryanair Holdings Plc slid 5.6 percent after the budget airline forecast its first annual income decline in five years. Finmeccanica SpA dropped 4.8 percent after cutting its full-year outlook.
The Stoxx Europe 600 Index added 0.4 percent to 322.72 this past week. The benchmark measure, which climbed to the highest level since May 2008 on Nov. 6, has risen 15 percent this year, on course for the biggest annual advance since 2009 as central banks globally took steps to support the economic recovery.
“The ECB rate cut is good news, not only because of easier money but also because it should push the euro lower,” said Pierre Mouton, who helps oversee $6 billion as a portfolio manager at Notz, Stucki & Cie. in Geneva. “I’m very happy with the performance of European equities so far this year and we still prefer it for valuation reasons.”
National benchmark indexes advanced in 12 of the 18 western European markets this week. Germany’s DAX added 0.8 percent and the Swiss Market Index rose 0.2 percent. The U.K.’s FTSE 100 (UKX) slid 0.4 percent and France’s CAC 40 dropped 0.3 percent.
The ECB on Nov. 7 trimmed its benchmark interest rate to 0.25 percent from 0.5 percent. The reduction was forecast by just three of 70 economists in a Bloomberg News survey, with the rest predicting no change. The ECB expects interest rates to remain at the current level or lower for an extended period of time, President Mario Draghi said at a press conference after the announcement.
The Bank of England maintained its key interest rate at 0.5 percent and kept its asset-purchase target at 375 billion pounds ($603 billion), matching the median forecast of economists surveyed by Bloomberg.
U.S. payrolls climbed by 204,000 in October, following a revised 163,000 gain a month earlier, Labor Department figures showed yesterday. The median forecast of economists surveyed by Bloomberg had called for an increase of 120,000. The rate of unemployment rose to 7.3 percent from an almost five-year low.
A Commerce Department report on Nov. 7 showed the world’s biggest economy expanded at a 2.8 percent annualized rate in the third quarter after a 2.5 percent gain in the previous period. That exceeded the 2 percent increase predicted by analysts in a Bloomberg survey. The Fed last week said it needs to see more evidence of sustained economic improvement before slowing the pace of its $85 billion monthly bond purchases.
Commerzbank jumped 10 percent for the biggest weekly gain since Aug. 9. Germany’s second-largest lender said third-quarter net income climbed to 77 million euros ($103 million), beating the 32 million-euro estimate of analysts surveyed by Bloomberg.
ArcelorMittal climbed 11 percent, the best weekly performance since December 2011, as the steelmaker said earnings before interest, taxes, depreciation and amortization rose to $1.71 billion in the third quarter. That surpassed the $1.53 billion average analyst projection.
International Consolidated Airlines Group SA gained 6.5 percent after saying it expects full-year operating profit of about 740 million euros, compared with a previous forecast that it would at least equal 2011’s 485 million euros. The British Airways parent said third-quarter operating profit before one-time items rose to 690 million euros from 270 million euros a year earlier.
Ryanair tumbled 5.6 percent in Dublin after Europe’s largest discount airline forecast full-year profit after tax of 500 million euros to 520 million euros. Ryanair had said in September net income would probably be at the lower end of a range between 570 million euros and 600 million euros, and warned it may be even lower if fare yields continued to worsen.
Finmeccanica dropped 4.8 percent after the Italian arms company said it expects a cash outflow of 350 million euros to 450 million euros in 2013, having previously forecast an inflow of 100 million euros. Full-year earnings before interest, tax, and amortization will be 5 percent to 10 percent lower than its 1 billion-euro target, the company said.
Inmarsat Plc tumbled 6.6 percent as the world’s biggest provider of maritime-satellite services reported third-quarter sales that missed analysts’ estimates and said a difficult outlook for its U.S. government business will hurt 2014 operating profit.
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