Most European Stocks Rise on Fed Outlook for U.S. EconomyJonathan Morgan
Most European stocks advanced as the Federal Reserve said the U.S. economy is growing and the European Central Bank and Bank of England kept their benchmark interest rates on hold.
Aggreko Plc jumped the most in more than four years after the world’s largest provider of mobile power supplies reported increased profit and raised its dividend. Carrefour SA rallied to a 19-month high after France’s biggest retailer posted a smaller-than-estimated decline in earnings. Aviva Plc plunged the most since 2009 after the U.K. insurer cut its dividend.
The Stoxx Europe 600 Index declined 0.1 percent to 293.19 at the close of trading, as five shares gained for every four that fell. The benchmark gauge climbed to its highest level since June 2008 on March 5 amid optimism that central banks around the world will continue their stimulus measures. The index has advanced 4.8 percent this year.
“Investors are hopeful that U.S. economic growth has some foundation,” Jeremy Batstone-Carr, head of research at Charles Stanley Group Plc in London, said in a telephone interview. “Irrational exuberance continues to dominate, with continuous liquidity infusion from central banks.”
The U.S. economy, the world’s biggest, grew at a modest to moderate pace across most of the country amid rising consumer demand for homes and cars, the Fed said late yesterday in its Beige Book business survey. The assessment helped the Dow Jones Industrial Average close at a record of 14,296.24.
A Labor Department report today showed the number of Americans filing initial claims for unemployment benefits declined to a six-week low of 340,000 last week. Data tomorrow may show U.S. employers added 163,000 jobs in February, while the unemployment rate remained at 7.9 percent, according to Bloomberg surveys of economists.
“New highs in the U.S. make everyone feel better,” Andy Lynch, a portfolio manager at Schroder Investment Management Ltd. in London, who helps manage about $1.6 billion, wrote in e-mailed comments. “Earnings haven’t been disastrous, so there’s no reason to sell.”
The ECB kept its benchmark interest rate unchanged at a record low of 0.75 percent today, as forecast by 56 of 61 economists in a Bloomberg survey. The central bank predicted the euro-area economy will shrink 0.5 percent this year, more than the 0.3 percent contraction it forecast three months ago.
“Later in 2013, economic activity should gradually recover, supported by a strengthening global backdrop and our accommodative monetary-policy stance,” ECB President Mario Draghi said at a press conference in Frankfurt.
National benchmark indexes gained in 13 of the 18 western-European markets. The U.K.’s FTSE 100 Index added 0.2 percent and France’s CAC 40 rose 0.5 percent. Germany’s DAX increased 0.3 percent.
The Bank of England also left its key rate unchanged, along with its four-year-old bond-purchase program. The Monetary Policy Committee maintained its target for quantitative easing at 375 billion pounds ($564 billion), as forecast by 29 of 39 economists in a Bloomberg survey. The remainder had predicted an expansion of at least 25 billion pounds.
Aggreko surged 10 percent to 1,939 pence, its biggest gain since October 2008, as the company forecast “double digit” average revenue growth over the next five years.
Carrefour climbed 2.9 percent to 22 euros, its highest price since July 2011. Annual recurring operating income fell 2.6 percent to 2.14 billion euros ($2.8 billion), beating the 2.07 billion-euro average analyst estimate.
Adidas AG climbed 6.6 percent to 76.38 euros, the highest price since the shares started trading in November 1995. The world’s second-largest sporting-goods maker forecast higher sales and profit this year and raised its dividend by 35 percent as it targets fast-growing emerging markets.
Aviva plummeted 13 percent to 314.8 pence, its biggest drop since March 2009. The U.K.’s second-largest insurer by market value said it won’t pay bonuses to its executive directors or award pay rises for 2013 after cutting its second-half dividend by 44 percent. The company will pay a final dividend of 9 pence a share for 2012, down from 16 pence in the previous year.
“Aviva has historically been one of the biggest dividend payers and its decision to cut its dividend has had a big impact,” Batstone-Carr said.
National Express Group Plc slid 11 percent to 204.5 pence, its biggest drop since Oct. 24. The rail and bus operator’s largest investor, hedge fund Elliott Advisors, sold a 9.9 percent stake at 210 pence a share.
Davide Campari-Milano SpA slipped 2.7 percent to 5.88 euros. The maker of Skyy vodka reported an unexpected drop in annual profit amid declining sales in Italy and Brazil and said this year will also be “challenging.”