European Stocks Rise as EON, Swiss Life Climb on Earnings
European stocks rose to their highest level in a week as EON SE and Swiss Life Holding AG (SLHN) reported better-than-expected profit.
EON rose the most since September as Germany’s largest utility said higher production at its North Sea fields benefited earnings. Swiss Life rallied 7.1 percent on increased sales of occupational benefits in its home market. Gagfah SA added 2.9 percent after the third-biggest German property company raised its 2014 earnings forecast for a second time.
The Stoxx Europe 600 Index gained 0.4 percent to 330.02 at the close of trading. The benchmark has still fallen 5.6 percent from a six-year high on June 10 as U.S. President Barack Obama authorized air strikes against militants in Iraq and concern grew over fighting in Ukraine and Israel. Germany’s DAX dropped 10 percent from its record through the end of last week, meeting the common definition of a correction.
“This could be the trough of European corporate earnings that we’ve all been waiting for,” Dirk Thiels, head of investment management at KBC Asset Management NV, said by phone from Brussels. “Since fundamentals have not changed and the global economy is still headed in the right direction, I see the recent correction as a buying opportunity.”
European equities pared gains after the Bank of England lowered its forecasts for wage growth in the U.K. The central bank predicted pay will rise an annualized 1.25 percent in the fourth quarter, down from the 2.5 percent it predicted in May. Wage growth will reach 3.25 percent at the end of 2015, less than the previous estimate of 3.5 percent.
A Commerce Department report showed that U.S. retail sales were unchanged in July, halting five months of increases. Economists had predicted a gain of 0.2 percent.
The Stoxx 600 traded at 15 times the projected earnings of its members, down from a peak of 15.7 in July, data compiled by Bloomberg show. Profit for companies listed on the gauge will probably climb 7.5 percent in 2014, according to forecasts compiled by Bloomberg. Analysts had predicted growth of 14 percent at the beginning of this year.
The number of shares trading hands in Stoxx 600-listed companies was 19 percent lower than the average of the past 30 days, data compiled by Bloomberg showed. Some 15 companies on the U.K.’s FTSE 100 Index (UKX) trade without the right to their latest dividend today, shaving 21.92 points off the benchmark.
National benchmark indexes advanced in every western-European market except Luxembourg and Iceland. The U.K.’s FTSE 100 Index gained 0.4 percent, France’s CAC 40 rose 0.8 percent and Germany’s DAX rallied 1.4 percent.
EON jumped 4.8 percent to 13.80 euros. The utility reported first-half underlying net income of 1.53 billion euros ($2 billion), more than the 1.46 billion-euro average analyst projection compiled by Bloomberg. Chief Executive Officer Johannes Teyssen said its retail business in Germany has attracted more customers. He also reiterated the group’s annual profit forecast from May.
RWE AG, which reports first-half earnings tomorrow, climbed 3.1 percent to 29.31 euros. Italy’s Enel SpA advanced 1.6 percent to 3.90 euros. EDP-Energias de Portugal SA increased 3.4 percent to 3.30 euros, making the biggest contribution to a 1.9 percent rally by the PSI 20 Index. The gauge had fallen for six days, reaching its lowest level in 13 months.
Swiss Life jumped 7.1 percent to 226 Swiss francs. The life insurer said net income rose to 484 million francs ($533 million) in the first half from 472 million francs a year earlier. That beat the 456 million-franc average estimate of analysts surveyed by Bloomberg. Swiss Life also said it will pay 210 million euros for Corpus Sireo, a real estate asset manager.
Gagfah added 2.9 percent to 13.99 euros. Funds from operations excluding asset sales, a measure of a real estate company’s ability to generate cash, will reach as much as 88 euro cents a share in 2014, the company said in a statement. It forecast FFO of as much as 86 cents in May. Gagfah said it has reduced its vacancy rate and its financing costs.
Nobel Biocare Holding AG (NOBN) gained 4 percent to 16.80 francs. Credit Suisse Group AG raised its rating on dental-implant maker, which is exploring a sale, to outperform, similar to a buy recommendation, from neutral. The brokerage said the company has received possible takeover bids. EQT Partners AB and Danaher Corp. have shown interest in buying the business, people with knowledge of the matter said earlier this week.
Merck KGaA added 3.2 percent to 64.37 euros after the drugmaker’s acquisition of AZ Electronic Materials SA helped second-quarter earnings beat estimates. Earnings before interest, taxes, depreciation and amortization excluding one-off items climbed to 845.7 million euros from 826.4 million euros a year earlier, according to a statement. Analysts had predicted 837 million euros on average.
Meda AB (MEDAA) tumbled 8.6 percent to 93 kronor, its largest decline since February 2012. The Swedish drugmaker said second-quarter Ebitda rose to 993 million kronor ($144 million), less than the 1.1 billion kronor projected by analysts. U.S. so-called organic sales fell 2 percent in the period as competition increased for its Astepro nasal spray.
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