European Stocks Climb to Five-Year High as HSBC RalliesInyoung Hwang
European stocks rose to a five-year high as HSBC Holdings Plc reported increased profit and investors awaited this week’s interest-rate decision from the European Central Bank.
HSBC climbed the most in two months as Europe’s biggest bank said pretax profit gained 30 percent. PostNL NV rallied 7.8 percent after the Dutch postal operator raised its income guidance. Ryanair Holdings Plc tumbled the most in five years after cutting its earnings forecast amid higher competition and a weaker economy. UBS AG and Credit Suisse Group AG fell.
The Stoxx Europe 600 Index gained 0.3 percent to 322.5 at the close of trading, the highest since May 2008. The benchmark measure climbed 0.4 percent last week, extending this year’s rally to 15 percent, as companies from BP Plc to Alcatel-Lucent SA posted results that exceeded analysts’ estimates and cooling inflation fueled speculation the ECB will ease monetary policy.
“This is one of the busiest weeks for Europe in terms of earnings,” Tobias Britsch, who helps oversee about $35 billion at Meriten Investment Management GmbH, said by telephone from Dusseldorf, Germany. “Market movements are currently a mixture of reporting season with decisions from central banks.”
National benchmark indexes rose in 14 of the 18 western European markets this week. The U.K.’s FTSE 100 and France’s CAC 40 added 0.4 percent, while Germany’s DAX gained 0.3 percent.
Bank of America Corp., UBS and Royal Bank of Scotland Group Plc forecast the ECB will cut rates at the meeting on Thursday, according to a Bloomberg News survey of 68 economists, with the rest predicting no change. The ECB last lowered its benchmark rate in May to a record 0.5 percent.
“Although the ECB meeting is still a few days away and expectations are for no change on current policy, traders are eagerly anticipating some form of dovish hint that looser conditions are on the way,” Jonathan Sudaria, a trader at Capital Spreads in London, wrote in e-mailed comments.
Traders have pushed futures tracking euro-area stock-market volatility to the highest prices of the year. Three-month futures are pricing in a 24 percent increase in the VStoxx Index and traded 32 percent above the gauge’s level on Oct. 25, according to data compiled by Bloomberg. The VStoxx, which tracks one-month volatility expectations for the Euro Stoxx 50 Index, is down 31 percent from its October high.
HSBC rose 2.3 percent to 703 pence, the biggest gain since Sept. 5. Third-quarter pretax profit advanced to $4.53 billion from $3.48 billion as costs as a proportion of revenue, excluding gains and losses in the value of the bank’s own debt, fell to 61 percent from 64 percent.
PostNL climbed 7.8 percent to 4.17 euros in Amsterdam, the highest price since March 2012. The company said it has cut costs and boosted its forecast for full-year underlying cash operating profit to 130 million euros ($175 million) to 160 million euros, compared with previous guidance of 50 million euros to 90 million euros.
K+S AG soared 9.3 percent to 20.98 euros, the largest gain since April 2009. Commerzbank AG upgraded Europe’s biggest producer of potash to hold from reduce and HSBC raised the shares to neutral from underweight. The stock has still plunged 40 percent this year.
Fuchs Petrolub SE increased 5.8 percent to 62.84 euros, the biggest rally in eight months, as the German maker of lubricants said earnings before interest and taxes gained 5.8 percent to 83.4 million euros in the third quarter.
Ryanair tumbled 13 percent to 5.33 euros, the biggest drop since July 2008. Europe’s largest discount airline said net income for the year ended March 31 will be in the range of 500 million euros to 520 million euros. The Dublin-based carrier had previously predicted profit of as little as 570 million euros and had cautioned that it may fall short of that number. Earnings last year were 569 million euros.
EasyJet Plc, Europe’s second-biggest discount carrier, fell 5.1 percent to 1,230 pence. Air France-KLM Group, Europe’s largest airline, slipped 1.6 percent to 7.30 euros.
UBS, the biggest Swiss bank, sank 5.3 percent to 16.54 francs, the lowest price since July, and Credit Suisse slid 6.7 percent to 26.21 francs, the biggest drop in 15 months. Swiss Finance Minister Eveline Widmer-Schlumpf said yesterday lenders including UBS and Credit Suisse may have to pull out of investment banking as she called for their leverage ratios to be raised.
“Banks would have to consider whether to carry on with investment banking or focus even more on asset management,” Widmer-Schlumpf was quoted as saying in an interview with Schweiz am Sonntag. Banks “must be organized in such a way that the state isn’t ultimately held liable.”
Weir Group Plc declined 3.7 percent to 2,173 pence. The U.K.’s biggest supplier of pressure pumps said in a statement that third-quarter sales and earnings missed its forecasts because of delivery delays in its minerals segment and a slower-than-anticipated recovery in the oil and gas markets.
Alcatel dropped 3.8 percent to 2.86 euros as the French networking-equipment manufacturer said it is seeking 955 million euros in a capital increase.