European Stocks Advance on U.S. Earnings Optimism

European stocks rose to the highest in more than 22 months as Alcoa Inc. began the U.S. earnings season with sales that beat projections.

Telecom Italia SpA led a gauge of telecommunications companies higher, climbing the most in 2 1/2 years, after a report that mobile-phone operators discussed sharing their infrastructure across Europe. Delta Lloyd NV jumped 6.6 percent after Aviva Plc sold its stake in the Dutch insurer. ArcelorMittal slid 2.5 percent after the world’s biggest steelmaker said it will sell $3.5 billion of stocks and notes to lower debt.

The Stoxx Europe 600 Index advanced 0.7 percent to 288.22 at the close of trading, the highest since Feb. 18, 2011. The benchmark gauge last week surged 3.3 percent after U.S. lawmakers agreed on a compromise budget.

“Alcoa’s results were good, especially the revenue numbers and forward guidance, as was the comment that demand in China is coming back,” said Manish Singh, who helps manage more than $2 billion as head of investment at Crossbridge Capital in London. “U.S. earnings will probably beat expectations and this should lift European stocks.”

The volume of shares traded on the Stoxx 600 today was 70 percent higher than the average of the last 30 days, according to data compiled by Bloomberg. The VStoxx Index, a measure of Euro Stoxx 50 options prices, fell 4.5 percent to 16.15.

Alcoa Results

Alcoa, the largest U.S. aluminum producer, unofficially kicked off the earnings season late yesterday as it reported fourth-quarter sales of $5.9 billion, beating the $5.6 billion average analyst estimate in a Bloomberg survey. Fourth-quarter profits from S&P 500 companies probably increased 2.9 percent, according to analysts’ estimates compiled by Bloomberg.

German industrial production rose 0.2 percent in November, after a revised 2 percent drop a month earlier, the Economy Ministry in Berlin said. That’s the first time output climbed in four months. Economists on average had predicted a 1 percent increase, according to a Bloomberg survey.

National benchmark indexes advanced in 16 of the 18 western European markets. The U.K.’s FTSE 100 added 0.7 percent, while France’s CAC 40 climbed 0.3 percent. Germany’s DAX gained 0.3 percent.

A gauge of telecommunications shares was the best performer among the 19 industry groups in the Stoxx 600. Mobile-phone operators including Deutsche Telekom AG and France Telecom SA discussed the creation of a pan-European network with Competition Commissioner Joaquin Almunia, the Financial Times reported, citing people familiar with the matter.

Telecom Italia soared 8.8 percent to 75.7 euro cents, the biggest rally since May 2010. Deutsche Telekom advanced 3.4 percent to 9.14 euros and France Telecom climbed 4.3 percent to

8.75 euros. Vodafone Group Plc gained 1.9 percent to 165.5 pence.

Aviva Sale

Delta Lloyd surged 6.6 percent to 13.71 euros, the largest increase since June 29, after Aviva sold its 19.4 percent stake in the Dutch company for 433.8 million euros ($568 million). Aviva, the U.K.’s second-biggest insurer by market value, slipped 2.2 percent to 373.7 pence.

Galapagos NV jumped 6.9 percent to 18.48 euros, the highest price since the company sold shares to the public in May 2005. The Belgian drugmaker said in a statement it will receive a milestone payment from GlaxoSmithKline Plc as it delivered a fifth pre-clinical candidate drug as part of their development alliance.

Shire Plc advanced 2.3 percent to 2,008 pence as it confirmed its guidance for full-year earnings growth. The Irish drugmaker expects “double digit” earnings growth in 2012.

“Shire is now increasingly confident of meeting current consensus earnings expectations for 2013,” the company said in a statement.

ArcelorMittal Slides

ArcelorMittal fell 2.5 percent to 13.08 euros, the largest decline since Oct. 31. The steelmaker plans to raise about $3.5 billion selling shares and convertible subordinated notes to help cut debt to about $17 billion by the end of June.

J Sainsbury Plc lost 2.9 percent to 329.2 pence after the U.K.’s third-largest supermarket chain said same-store sales excluding revenue from fuel rose 0.9 percent in the 14 weeks ended Jan. 5, the weakest of 32 consecutive quarters of gains. A gauge of retail shares was the worst-performing industry group in the Stoxx 600, falling 0.7 percent.

Lanxess AG, whose polymers unit makes synthetic rubbers, slid 2.2 percent to 61.91 euros after Citigroup Inc. downgraded the shares to sell from neutral, citing a “sluggish” outlook for demand in the tire industry.

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