European Stocks Advance on German Manufacturing Report

European stocks climbed the most in three weeks as a report showed Germany’s manufacturing and services industries expanded at a faster-than-expected pace.

Royal Ahold NV rallied the most since May 2009 after the Dutch owner of the Stop & Shop supermarket chain reported second-quarter underlying operating income that exceeded analysts’ estimates. IMI Plc rose to its highest price since at least 1988 after posting first-half adjusted pretax profit that beat analysts’ estimates.

The Stoxx Europe 600 Index added 1 percent to 303.55 at the close of trading as more than five shares rose for every one that fell. The equity benchmark has rallied 10 percent from this year’s low on June 24 as the European Central Bank said that interest rates will remain low for an extended period.

“The euro zone’s growth engine is doing well,” Witold Bahrke, who helps oversee $55 billion as a senior strategist at PFA Pension A/S in Copenhagen, wrote in an e-mail. “Together with some relief from China hard-landing fears in the shape of stronger flash PMI there, this supports European equities, since domestic stabilization is being accompanied by positive macro news from one of the most important export markets.”

A measure of German manufacturing compiled by Markit Economics climbed to 52 in August from 50.7 in July. The median economist estimate had called for a reading of 51.1, according to a Bloomberg survey. The company’s gauge of services advanced to 52.4, beating the median estimate of 51.7.

Chinese Manufacturing

In China, a purchasing managers’ index of manufacturing from HSBC Holdings Plc and Markit rose to 50.1 in August from 47.7 in July. Economists had predicted the PMI would climb to 48.2. Readings greater than 50 mean that activity increased.

The Federal Reserve published the minutes from its July 30-31 meeting late yesterday. They showed that almost all the participants agreed with Chairman Ben S. Bernanke’s plan to start reducing bond buying later this year if the economy continues to improve in line with forecasts.

The Federal Open Market Committee continued to expect that growth will accelerate in the second half of 2013 and into 2014. After the July meeting, policy makers affirmed a pledge to continue bond buying until they see evidence that “the outlook for the labor market has improved substantially.”

A Labor Department report showed that initial claims for unemployment benefits in the U.S. rose to 336,000 last week from a revised 323,000 in the preceding week. That beat the median economist estimate of 330,000 in a Bloomberg survey.

Volumes Drop

The volume of shares changing hands in companies listed on the Stoxx 600 was 15 percent lower than the average of the last 100 days, according to data compiled by Bloomberg.

National benchmark indexes declined in every western-European market today, except Greece and Iceland. Germany’s DAX added 1.4 percent, while the U.K.’s FTSE 100 gained 0.9 percent. France’s CAC 40 rose 1.1 percent.

Ahold jumped 5.2 percent to 12.86 euros. The retailer said quarterly underlying operating income gained 5.4 percent to 338 million euros ($452 million), beating the 323.8 million-euro average estimate of 10 analysts. The company said it may make acquisitions to expand into new markets.

Separately, JPMorgan Chase & Co. raised the shares to overweight, similar to a buy rating, from neutral.

“We continue to view Ahold as a well managed company with relatively high earnings visibility,” analysts led by Jaime Vazquez wrote in a note. “The company has very comfortable positions in the markets where it operates.”

Home Retail Group Plc, the owner of the Argos catalog chain, added 3.6 percent to 150.3 pence. Inditex SA, the world’s largest clothing retailer, rose 3.1 percent to 103.50 euros. A gauge of European retailers advanced 1.3 percent.

IMI Advances

IMI surged 5.8 percent to 1,491 pence. The maker of air-conditioning equipment said first-half adjusted pretax profit rose 1 percent to 170 million pounds ($265 million). That exceeded the average analyst projection of 164 million pounds in a Bloomberg survey.

A gauge of banks contributed the most to the Stoxx 600’s rally as yields on 10-year Spanish and Italian bonds dropped. Banco Popular Espanol SA jumped 5.6 percent to 3.99 euros, UniCredit SpA advanced 3.7 percent to 4.57 euros and Banco Espirito Santo SA rallied 5.2 percent to 90.4 euro cents.

Wolseley Plc gained 4.3 percent to 3,330 pence after UBS AG raised its recommendation on the world’s largest distributor of plumbing and heating products. The brokerage raised the shares to buy from neutral, citing accelerating growth in the U.S., improving momentum in the U.K. and stabilization in Europe.

BioMerieux added 0.9 percent to 77.64 euros. The French maker of tests for HIV and hepatitis won approval from the U.S. Food and Drug Administration to market the first mass spectrometer for automated identification of bacteria and yeasts known to cause serious illness.

Premier Oil Plc lost 2.9 percent to 346.5 pence, the biggest drop in almost three months. The energy explorer reported first-half net income of $161 million, falling short of the average analyst estimate of $180 million.

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