European Stocks Rise as German Sentiment Improves

European stocks rose to the highest level in three weeks as German economic sentiment improved more than forecast and Danone SA rallied after reporting earnings.

Danone, the world’s largest yogurt maker, surged the most since May 2010 after also announcing job cuts. Drax Group Plc climbed to a four-year high as the operator of Britain’s biggest coal-fired power station posted profit that topped projections. Bayer AG added 3.6 percent after beginning a new drug trial. Vodafone Group Plc sank to a four-week low as Sanford C. Bernstein & Co. downgraded the shares.

The Stoxx Europe 600 Index advanced 1.1 percent to 290.01 at the close, erasing a 0.5 percent loss over the previous three days. The benchmark gauge has gained 3.7 percent this year as U.S. lawmakers agreed on a compromise federal budget. The index is trading at 12.5 times estimated earnings, up from a multiple of 9 in September 2011, according to data compiled by Bloomberg.

Danone “was a mainly positive report,” said Espen Furnes, who helps oversee $75 billion as fund manager at Storebrand Asset Management in Oslo. “We expect the European economy to pick up somewhat during 2013 which, combined with decent growth from other regions, means there still is material upside in European stocks in the longer term.”

German investor confidence increased to the highest level in almost three years in February. The index of investor and analyst expectations climbed to 48.2 from 31.5 in January, the ZEW Center for European Economic Research said. That exceeded the median estimate of economists in a Bloomberg survey calling for an increase to 35.

Earnings Season

Of the Stoxx 600 members that have reported results since Jan. 8, about 54 percent exceeded analysts’ profit estimates, according to data compiled by Bloomberg. Earnings at companies in the index will rise 0.6 percent in 2012 and 6 percent this year, estimates compiled by Bloomberg show.

National benchmark indexes advanced in all 18 western European markets, except Iceland. Germany’s DAX jumped 1.6 percent and France’s CAC 40 surged 1.9 percent. The U.K.’s FTSE 100 climbed 1 percent to a five-year high.

The volume of shares changing hands in Stoxx 600 companies was 21 percent lower than the 30-day average, according to data compiled by Bloomberg.

Danone jumped 5.9 percent to 53.15 euros as the company said it plans to cut 900 jobs in Europe after 2012 profitability declined on weak consumption in southern Europe. Fourth-quarter net income from continuing operations rose to 1.82 billion euros, in line with the 1.81 billion-euro average analyst estimate in a Bloomberg survey.

Drax Climbs

Drax advanced 6.1 percent to 641.5 pence, the highest price since November 2008. Earnings before interest, taxes, depreciation and amortization fell to 298 million pounds ($460 million) in 2012, beating the 293.2 million-pound average estimate of 14 analysts surveyed by Bloomberg. Drax also said it’s accelerating a plan to convert the plant to burn biomass.

Bayer rose 2.50 euros to 71.79 euros after saying it began a Phase-3 trial of the Eylea injection, along with Regeneron Pharmaceuticals Inc. The trial aims to evaluate the efficacy and safety of the drug in treating Diabetic Macular Edema in Russia, China and other Asian countries, the companies said.

ThromboGenics NV soared 5 percent to 39.45 euros for its biggest increase in two months. The Belgian drugmaker will join the nation’s benchmark Bel20 Index next month, NYSE Euronext said in a statement.

Oprah Endorsement

SEB SA gained 4 percent to 62.38 euros, its biggest jump in seven months, after Le Parisien said that U.S. chat show host Oprah Winfrey praised one of the company’s electric fryers.

The T-FAL Actifry, which fries food using 1 tablespoon of oil, “has changed my life,” Winfrey posted on Twitter on Feb. 15. “And they’re not paying me to say it.” The French newspaper reported the endorsement today.

MTU Aero Engines Holding AG rose 2.9 percent to 71.08 euros, its biggest advance since September, after saying group revenue will increase 10 percent to 12 percent in 2013. Germany’s biggest aircraft-engine maker posted 2012 adjusted operating profit of 374.3 million euros ($501 million), beating its own forecast of 370 million euros, according to a statement.

Vodafone dropped 2 percent to 163.5 pence after Bernstein lowered its recommendation on the shares to underperform, the equivalent of sell, from market perform. The European assets of the world’s second-largest wireless carrier will shrink by 23 percent in the next three years as the company faces “structural decline,” analysts led by Robin Bienenstock wrote in a report.

Nobel Biocare Holding AG fell 3.2 percent to 9.61 Swiss francs after Chief Executive Officer Richard Laube said markets will remain difficult in the short term. The world’s second-biggest maker of dental implants reported fourth-quarter net income of 11.2 million euros, exceeding the average analyst estimate of 9.55 million euros.

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