European Stocks Climb as Fed’s Lockhart Backs StimulusNamitha Jagadeesh
European stocks rose, rebounding from a one-month low, as Federal Reserve Bank of Atlanta President Dennis Lockhart said the central bank is committed to its stimulus program.
Banco Santander SA and Inditex SA paced gains in Spanish equities as unemployment declined more than forecast. Assicurazioni Generali SpA advanced 1.2 percent after agreeing to sell its U.S. reinsurance unit to Scor SE. STMicroelectronics NV rallied the most in almost a month as Chief Executive Officer Carlo Bozotti said orders have been positive.
The Stoxx Europe 600 Index climbed 0.3 percent to 299.59 at the close. The benchmark gauge fell to the lowest level since May 2 yesterday amid speculation the Fed will scale back bond buying. The measure rose 1.4 percent in May for a 12th straight monthly advance and has rallied 7.1 percent this year.
“Markets are seeing Lockhart’s comments as positive,” Herbert Perus, who helps oversee about $36 billion as head of equities at Raiffeisen Capital Management in Vienna, said by phone. “We think the macro data in the U.S. will not be very bullish and that the quantitative easing will continue. We’re very bullish on European equities as it’s the most undervalued market in the world.”
Lockhart said late yesterday that recent data suggest the economy lacks the strength to justify a reduction in the central bank’s bond-buying program.
“To the extent that the markets are seeing mixed messages, it simply reflects the debate that’s going on among the colleagues on the Federal Open Market Committee,” Lockhart said in a Bloomberg Television interview. “The bigger picture is that any adjustment is not a major policy shift.”
Nick Nelson, a strategist at UBS AG in London, raised his year-end forecast for the Stoxx 600 by 12 percent to 325 today, saying equity valuations will increase as the U.S. economy reaches “escape velocity” and risks in Europe diminish. The new target is 8.5 percent above today’s closing level.
The Stoxx 600 trades at 13.2 times estimated earnings, compared with 14.9 times for the S&P 500 and 13.1 times for the MSCI Asia Pacific, according to data compiled by Bloomberg.
National benchmark indexes climbed in 12 of the 18 western European markets. The U.K.’s FTSE 100 added 0.5 percent, while France’s CAC 40 and Germany’s DAX increased 0.1 percent.
Spain’s IBEX 35 Index advanced 1 percent as the Labor Ministry said registered unemployment fell by 98,265 to 4.89 million in May from a month earlier. Economists on average had forecast a drop of 50,000.
Santander, Spain’s biggest lender, increased 1.5 percent to 5.58 euros. Inditex, the world’s largest clothing retailer, added 0.7 percent to 97.92 euros.
Generali, Italy’s biggest insurer, advanced 1.2 percent to 14.51 euros after Scor said it will pay about 579 million euros ($757 million) plus an “earnings adjustment” for Generali USA Life Reassurance Co. Scor, France’s largest reinsurer, rose 2.7 percent to 22.86 euros.
STMicroelectronics, Europe’s biggest chipmaker, gained 4.5 percent to 7.50 euros in Milan after Bozotti said in an interview with Le Figaro that orders have been positive in all regions. The company is seeking an increase of 5 percent to 10 percent in orders this year, according to the newspaper.
A gauge of food and beverage companies was the best performer among 19 industry groups in the Stoxx 600. Nestle SA, the world’s biggest food producer, climbed 3.2 percent to 63.95 Swiss francs, the biggest jump in almost 21 months. Brewers SABMiller Plc and Heineken NV advanced 1.5 percent to 3,360 pence and 0.9 percent to 53.87 euros, respectively.
Rentokil Initial Plc rallied 2.6 percent to 90.75 pence after the Financial Times reported that private equity firm Clayton Dubilier & Rice LLC is considering buying the pest-control provider’s Initial Facilities unit. Clayton Dubilier plans to combine the office-maintenance unit with Balfour Beatty Plc’s WorkPlace, the newspaper said, citing unnamed people familiar with the matter.
Balfour Beatty, the U.K.’s largest construction company, fell 1.9 percent to 228.1 pence.
Portugal Telecom SGPS SA soared 7 percent to 3.37 euros, the biggest jump in three years. The Portuguese phone company said Zeinal Bava will become chief executive officer of Oi SA, while Portugal Telecom Chairman Henrique Granadeiro will take on the additional role of CEO.
Societe Generale SA, France’s second-largest bank, advanced 1.4 percent to 31.03 euros as Goldman Sachs Group Inc. analysts recommended investors buy the shares, citing the firm’s improved funding levels.
Wolseley Plc slid 6.3 percent to 3,145 pence, the largest drop in three years, after saying markets in Europe remain challenging. The world’s largest distributor of heating and plumbing products posted third-quarter revenue of 3.23 billion pounds ($4.9 billion) and said comparable sales fell 9.2 percent in France as new residential construction stayed weak.
Cobham Plc retreated 4.6 percent to 272.9 pence, the biggest drop in six months. A shareholder of the world’s largest maker of airborne-refueling kit is selling 39.1 million shares in the company, terms obtained by Bloomberg News show.
The volume of shares listed in the Stoxx 600 was 15 percent lower than the average of the last 30 days, according to data compiled by Bloomberg.