European Stocks Rise on Week as Data Outweigh Stimulus CoAlexis Xydias
European stocks advanced for a second week, as better-than-forecast economic data in Europe and China outweighed concern that the Federal Reserve will reduce the pace of its bond-purchase program.
Royal KPN NV soared 16 percent after billionaire Carlos Slim’s America Movil SAB offered to take over the Dutch phone operator. Securitas AB jumped 9.1 percent after the world’s second-biggest guarding-services provider reported quarterly profit that beat analyst estimates. Nestle SA fell 3.2 percent after posting the slowest first-half revenue growth in four years and warning it may not reach its sales forecast.
The Stoxx Europe 600 Index rose 0.6 percent to 305.92 this week. The gauge has rallied 11 percent since reaching a low on June 24 as the Federal Reserve said it remains flexible on the pace of bond buying, while the European Central Bank and the Bank of England signaled interest rates will remain low for an extended period.
“Things are getting less bad or starting to be a bit better in some cases,” said Karim Bertoni, who helps oversee about $3.3 billion at De Pury Pictet Turrettini & Co. in Geneva. “It is still not euphoria, but it is pointing at the right direction. We are constructive on equities.”
Investors scrutinized remarks this week from Fed officials who indicated willingness to begin tapering the central bank’s bond-buying program if the economic improvement continues. The Stoxx 600 plunged 11 percent from May 22 through June 24 amid speculation the Fed will begin reducing bond purchases as soon as September.
Fed Bank of Atlanta President Dennis Lockhart said in an interview with Market News International this week that if economic growth and job creation pick up as expected, the central bank should proceed with the “removal” of its asset purchases. Fed Bank of Cleveland President Sandra Pianalto said Aug. 7 there has been “meaningful improvement” in the labor market and that tapering may be warranted if it continues to strengthen.
National benchmark indexes rose in 15 of the 18 western European markets this week. France’s CAC 40 gained 0.8 percent, while Germany’s DAX Index dropped 0.8 percent.
The U.K.’s FTSE 100 slipped 1 percent as the Bank of England forecast unemployment will stay above 7 percent at least until the third quarter of 2016. The central bank’s new governor, Mark Carney, said interest rates will remain at a record low until the jobless rate falls to 7 percent from the current 7.8 percent.
Euro-area services output shrank at a slower pace in July than initially estimated, adding to evidence the economy is gathering strength to pull out of a record-long recession. An index of activity in the services industry based on a survey of purchasing managers rose to 49.8 from 48.3 in June, London-based Markit Economics said Aug. 5. That was above an initial estimate of 49.6 on July 24. A reading below 50 indicates contraction.
Factory orders in Germany rose an annual 4.3 percent in June, the Economics Ministry said Aug. 6, beating the average of 42 economists’ forecasts for growth of 0.3 percent.
In China, factory production increased 9.7 percent in July from a year earlier, the National Bureau of Statistics said yesterday. That beat economists’ forecast for 8.9 percent growth. The report came after government figures showed exports and imports in the Asian nation rebounded last month by more than estimated.
KPN surged 16 percent as America Movil offered 2.40 euros a share for the company. The price -- a 20 percent premium to KPN’s close on Aug. 8 -- would value the stake that America Movil doesn’t own at 7.2 billion euros ($9.6 billion). The Mexican mobile-phone operator has a 29.8 percent holding in KPN.
Securitas advanced 9.1 percent after reporting that second-quarter profit jumped 41 percent to 461.1 million kronor ($70.3 million). That beat the average 436.7 million-krona estimate of six analysts surveyed by Bloomberg.
Sky Deutschland AG jumped to the highest price in almost five years on Aug. 6 as additional customers helped profit beat estimates at the German pay-television provider controlled by Rupert Murdoch’s Twenty-First Century Fox Inc. The shares rose 9 percent in the week.
Commerzbank AG advanced 17 percent after second-quarter earnings fell less than analysts had estimated. Germany’s second-biggest bank said net income slid 84 percent to 43 million euros from 270 million euros in the second quarter of last year. That still beat the 4.6 million-euro average estimate of eight analysts surveyed by Bloomberg.
Nestle fell 3.2 percent. Chief Financial Officer Wan Ling Martello said Aug. 8 that reaching the organic sales growth needed in the rest of the year to meet the company’s forecast will be a “stretch” because of sluggish demand in Europe. First-half revenue increased 4.1 percent, excluding acquisitions, divestments and currency shifts, the world’s largest food company said. That missed the median analyst estimate of 4.5 percent growth.