European Stocks Advance on Bernanke TestimonySofia Horta e Costa
European stocks rose, rebounding from their biggest drop in more than a week, as Federal Reserve Chairman Ben S. Bernanke said that the pace of the recovery will determine when the central bank reduces its asset purchases.
BHP Billiton Ltd. rose 2 percent after saying quarterly iron-ore output jumped as its operations in Australia expanded. Thomas Cook Group Plc added 2.7 percent after UBS AG recommended that investors buy the shares. Unilever lost 1.6 percent in London as Credit Suisse AG downgraded its rating on the stock.
The Stoxx Europe 600 Index gained 0.6 percent to 297.04 at the close in London, after earlier falling as much as 0.6 percent. The gauge slipped from its highest level in almost six weeks yesterday. It has still rallied 6.2 percent this year.
“The market is looking at the Fed this week and expectations are for tapering to start in September,” said James Butterfill, who helps manage about $44 billion as head of global equity strategy at Coutts & Co. in London. “The key question is if Bernanke does taper, how will he do it?”
The number of shares changing hands in Stoxx 600-listed companies was 17 percent lower than the average of the past 30 days, data compiled by Bloomberg show.
Federal Reserve Chairman Ben S. Bernanke begins his two-day semi-annual monetary-policy report to Congress today. He said that the Fed will extend the time period for asset purchases if the outlook for employment worsens, according to prepared testimony. The central bank will reduce its bond buying if the economy improves faster than expected, he added.
U.S. housing starts unexpectedly dropped 9.9 percent in June to 836,000 from a revised 928,000 rate in May, a report from the Commerce Department showed. The median estimate of economists surveyed by Bloomberg had called for the measure to climb to 960,000. A separate release showed that building permits also unexpectedly fell last month.
In the U.K., all nine members of the Bank of England’s Monetary Policy Committee voted against expanding the bond-buying program, according to the minutes of the July 3-4 meeting published today. MPC members Paul Fisher and David Miles dropped their call to expand asset purchases by 25 billion pounds ($38 billion) at Governor Mark Carney’s first meeting.
The central bank will publish a review next month of how to steer investors’ expectations.
National benchmark indexes advanced in 15 of the 18 western-European markets. Germany’s DAX gained 0.7 percent, while France’s CAC 40 rose 0.6 percent. The U.K.’s FTSE 100 added 0.2 percent.
BHP Billiton, the world’s biggest mining company, gained 2 percent to 1,868 pence after setting a 13th annual output record. Iron-ore production rose to 47.7 million metric tons in the three months ended June 30, from 40.9 million tons a year earlier, Melbourne-based BHP said in a statement.
A gauge of commodity producers on the Stoxx 600 rose for a third day, its longest winning streak in two months. Rio Tinto Group and Glencore Xstrata Plc advanced 1.1 percent to 2,915 pence and 2.8 percent to 272 pence, respectively.
Thomas Cook increased 2.7 percent to 146.5 pence as UBS raised its rating on the stock to buy from neutral and added the travel operator to its “most preferred list.” The brokerage said that 2013 has provided “an almost perfect environment for tour operators.”
Unilever, which makes Dove soap, dropped 1.6 percent to 2,756 pence in London trading. Credit Suisse cut its rating on the stock to underperform, similar to a sell recommendation, saying the stock is expensive. The shares are trading at 19.3 times projected earnings, compared with a five-year average of 15.2 times, according to data compiled by Bloomberg.
Smiths Group Plc dropped 1 percent to 1,377 pence. The maker of security scanners predicted that operating profit will fall short of its previous forecast by as much as 15 million pounds for the full-year ending in July. The company also said it will make provisions for legal disputes and three contracts at its Smiths Detection unit.
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