European Stocks Advance Amid Growing Economic Optimism
European stocks advanced, extending a six-year high, amid optimism the global economic recovery remains on track. Germany’s DAX Index closed above 10,000 for the first time ever.
Banco Popular Espanol SA rose 4.6 percent after JPMorgan Chase & Co. advised investors to buy shares in the Spanish lender. Gecina SA dropped 2.9 percent after Metrovacesa SA offered to sell a 27 percent stake in the French real estate company. Lloyds Banking Group Plc slipped 1.7 percent after its consumer-lending unit set a price range below its book value for its initial public offering.
The Stoxx Europe 600 Index added 0.4 percent to 348.61 at the close in London, its highest level since January 2008. The gauge rallied for eight weeks for the longest streak since August 2012. Markets in Norway, Denmark, Switzerland, Austria, Iceland, Greece and Luxembourg are closed today for the Whit Monday holiday.
“It’s not the economic recovery that people had predicted, but it is slowly coming through,” said Derek Mitchell, who helps oversee about $126 billion at Royal London Asset Management. “If corporate earnings follow, all the ingredients will be there to take the market higher. This will happen at a much slower speed than people anticipated and it’s going to be very hard for fund managers to outperform their benchmarks.”
The Stoxx 600 advanced 0.9 percent last week after European Central Bank President Mario Draghi unveiled new plans to stimulate the region’s economy. The gauge trades at 15.6 times the projected earnings of its members, the highest valuation since 2009, data compiled by Bloomberg showed.
A report today showed Japan’s economy, Asia’s second-largest, expanded an annualized 6.7 percent in the first quarter, faster than the preliminary reading of 5.9 percent and beating the 5.6 percent median economist projection compiled by Bloomberg. Chinese exports in May rose more than estimated, according to data yesterday.
Reports last week showed American employers created more jobs in May than economists had predicted, while euro-area retail sales and German factory orders exceeded projections for April. Gross domestic product in the euro area has expanded every quarter since June 2013.
National benchmark indexes rose in all of the 11 western-European markets that opened today. The U.K.’s FTSE 100, the DAX gained 0.2 percent and France’s CAC 40 all gained 0.2 percent.
The number of shares trading hands today in Stoxx 600-listed companies was 23 percent lower than the average of the past 30 days, data compiled by Bloomberg showed.
Banco Popular gained 4.6 percent to 5.45 euros after JPMorgan upgraded its rating to overweight, similar to a buy recommendation, from neutral. The terms of the ECB’s targeted long-term refinancing operations are better than expected and will benefit banks in the region’s so-called peripheral countries the most, JPMorgan analyst Kian Abouhossein wrote.
Banco de Sabadell SA rose 2 percent to 2.65 euros, its highest price since January 2011.
A gauge of European mining companies climbed a fourth day, for the second-biggest gain among the 19 industry groups on the Stoxx 600. Randgold Resources Ltd. added 0.6 percent to 4,380 pence, while Antofagasta Plc advanced 1.1 percent to 781 pence.
Gecina dropped 2.9 percent to 107.70 euros. Institutional investors including Blackstone Group LP will buy 16.8 million Gecina shares for 92 euros each, Metrovacesa said in a statement on June 7.
Lloyds fell 1.7 percent to 78.82 pence. TSB Bank Plc will sell about 125 million shares, or 25 percent of its stock, in a range between 220 pence and 290 pence apiece. At the midpoint of the pricing range, TSB’s market capitalization would be about 1.28 billion pounds ($2.15 billion). TSB will announce the final price on June 20.
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