European Stocks Advance as Draghi Says ECB Ready to Act
European stocks rose climbed for the first time in five days, sending the Stoxx Europe 600 Index to its highest level in more than six years, after European Central Bank President Mario Draghi said policy makers are prepared to take action in June.
BT Group Plc advanced 2.9 percent as new Internet customers helped earnings beat analysts’ estimates for a sixth quarter. Enel SpA rose 5.2 percent after posting profit that fell less than predicted. Barclays Plc rallied the most in almost 15 months after saying it will cut more jobs. Munich Re slid 1.2 percent as the world’s largest reinsurer reported a profit drop.
The Stoxx 600 climbed 1.1 percent to 339.56 at the close in London, after earlier dropping as much as 0.2 percent. The gauge lost 0.7 percent in the past four days amid earnings disappointments at companies from Fiat SpA to Societe Generale SA and concern over the Ukraine crisis.
“The ECB will need to act at a certain point, maybe at its next meeting, even if it’s something more symbolic like a negative deposit rate,” Dirk Thiels, who helps oversee about $91 billion as head of investment management at KBC Asset Management NV, said by phone from Brussels. “Draghi wants to keep his powder dry to counter any downturn, but he’s walking the thin line on how long he can manage by just talking. When will the market challenge Draghi?”
The ECB left its benchmark interest rate unchanged at a record low of 0.25 percent today as predicted by all but two of the 58 economists surveyed by Bloomberg. The deposit rate stayed at zero and the marginal lending rate remained at 0.75 percent, matching estimates.
“The Governing Council is comfortable with acting next time, but before we want to see the staff projections that will come out in the early June,” Draghi said at a press conference in Brussels. “There wasn’t a decision today. It’s a preview of the discussion we will have next month.”
Profits for companies on the Stoxx 600 will climb 8.3 percent this year on average, according to analysts’ estimates compiled by Bloomberg. That’s down from a 14 percent increase projected in January.
BT increased 2.9 percent to 387.6 pence. Earnings before interest, taxes, depreciation and amortization in the three months ended March 31 rose 2 percent to 1.71 billion pounds. Analysts had predicted profit of 1.66 billion pounds. BT, which offers free sports channels for its Internet subscribers, gained 170,000 new broadband connections in the quarter.
Enel (ENEL), Italy’s biggest utility, added 5.2 percent to 4.22 euros. Adjusted net income fell to 782 million euros ($1.1 billion) from 852 million euros a year earlier, according to a statement. Analysts surveyed by Bloomberg had predicted 750 million euros.
Barclays rose 7.9 percent to 262.5 pence. The lender will cut 7,000 jobs at the investment bank, about a quarter of the total, to reduce its dependence on the unit. That will take the total number of jobs to be cut across the bank to 19,000 by 2016, including 12,000 announced in February. Barclays will also create a bad bank to dispose of 115 billion pounds of assets.
Metro AG increased 2.7 percent to 28.91 euros. Germany’s largest retailer reported a quarterly loss of 40 million euros before interest, taxes and one-time gains or costs, narrower than the 42.8-million euros loss projected by analysts.
Rheinmetall AG jumped 8 percent to 50.60 euros for its biggest rally since November 2011. The maker of pumps and pistons used for car engines said first-quarter sales climbed 12 percent to 1.08 billion euros, more than the 1.03 billion euros that analysts had predicted.
Munich Re slipped 1.2 percent to 157.47 euros, taking its losses since reaching 11-year high on April 29 to 7 percent. Net income fell to 919 million euros, with prices for non-life reinsurance up for renewal on April 1 dropping by about 8 percent, according to a statement.
Sage Group Plc slumped 5.3 percent, the most since May 2012, to 399.5 pence. The software maker posted six-month sales of 657 million pounds, missing the average analyst projection of 664.5 million pounds. Sage also said Guy Berruyer will retire as Chief Executive Officer by March 31, 2015.
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