Europe Stocks Rise as Ukraine Cease-Fire Steps DiscussedJonathan Morgan
European stocks rose as Russia and Ukraine agreed on the steps needed for a truce, and a worse-than-forecast euro-zone purchasing managers’ index stoked speculation that the area’s central bank will increase stimulus.
Equities with exposure to Russia advanced amid reports of the cease-fire discussions, with Nokian Renkaat Oyj, Carlsberg A/S and Raiffeisen Bank International AG among the biggest gainers. Danone rose to its highest price in four weeks after appointing Emmanuel Faber as chief executive officer as it split the chairman’s dual roles. Hermes International SCA fell 3.4 percent after LVMH Moet Hennessy Louis Vuitton SA said it will distribute its stake in the company to its own shareholders.
The Stoxx Europe 600 Index added 0.7 percent to 344.97 at the close of trading, reaching its highest level since July 4 after the cease-fire reports. The gauge has rebounded 6.2 percent from a four-month low on Aug. 8 as European Central Bank President Mario Draghi signaled policy makers are ready to increase stimulus to fight low inflation.
“It is the hoped-for stimulus at the ECB that is the main driver, with some additional help from a slight calming down on the geopolitical front,” Raimund Saxinger, who oversees $22 billion as a fund manager at Frankfurt-Trust Investment GmbH, said in a phone interview. “I think markets are aware that this can be reversed at any time, but that is what is contributing. The PMI probably increases the likelihood of stimulus as well.”
Russian President Vladimir Putin outlined a peace plan for Ukraine after agreeing with his Ukrainian counterpart Petro Poroshenko on steps toward a cease-fire in the conflict.
Putin called for an end to the rebels’ offensive in the country’s easternmost regions and urged the withdrawal of the Ukrainian military from residential areas as part of a seven-point proposal he presented today in Ulaanbaatar, Mongolia. A final agreement may be reached at a Sept. 5 meeting, he said.
Putin and Poroshenko agreed on a “cease-fire regime” and the steps toward peace, the Ukrainian president said.
A composite purchasing managers’ index for the euro area from Markit Economics fell to 52.5 in August from 53.8 in July, missing analyst forecasts of 52.8.
Central-bank stimulus has helped the Stoxx 600 rally about 61 percent from its low in September 2011. Since taking over in November of that year, Draghi has pledged to hold borrowing costs low and said in July 2012 he would do “whatever it takes” to save the euro.
In June of this year, the ECB took its deposit rate negative for the first time and cut its benchmark rate to a record low of 0.15 percent. The ECB meets to discuss monetary policy on Sept. 4.
National benchmark indexes gained in 17 of the 18 western-European markets today. France’s CAC 40 Index increased 1 percent and Germany’s DAX Index rose 1.3 percent.
The U.K.’s FTSE 100 Index climbed 0.7 percent to its highest level since June 9 after a report showed services growth unexpectedly accelerated in August, countering a slowdown in manufacturing. Markit’s purchasing managers’ index rose to a 10-month high of 60.5 from 59.1 in July. Economists had forecast a drop to 58.5.
Nokian Renkaat, the Nordic region’s largest tiremaker that got about 33 percent of its revenue from Russia in 2013, rose 7.5 percent to 26.10 euros. Carlsberg, Russia’s biggest brewer, added 2.3 percent to 529.50 kroner. Raiffeisen Bank International, which has relied on Russia as its biggest profit generator in the past three years, gained 6.2 percent to 20.02 euros.
Danone advanced 0.9 percent to 54.21 euros. The world’s biggest yogurt maker appointed Faber as CEO, while Franck Riboud remains chairman. The separation of the positions will help pave the way for “a smooth succession,” Paris-based Danone said late yesterday.
Ashtead Group Plc rose 3.6 percent to 1,022 pence after saying full-year results will be higher than previously forecast. The rental equipment company reported a 22 percent increase in first-quarter underlying rental revenue and said earnings before interest, taxes, depreciation and amortization jumped 30 percent to 209.9 million pounds ($345.7 million).
ING Groep NV climbed 1.5 percent to 10.70 euros. The biggest Dutch financial-services company said it will reduce its stake in a former U.S. insurance unit, Voya Financial Inc., by selling $1.18 billion in shares.
A gauge of bank-related stocks posted the second-biggest gain of the 19 industry groups on the Stoxx 600. Societe Generale SA added 2.6 percent to 39.37 euros. Commerzbank AG, Germany’s second biggest lender, climbed 1.6 percent to 11.80 euros.
LVMH increased 2.9 percent to 136.90 euros. Hermes dropped 3.4 percent to 253.75 euros, paring earlier losses of as much as 11 percent. The distribution of LVMH’s 23 percent holding -- worth about 5.7 billion euros ($7.5 billion) -- will end a four-year battle over its stake-building in the maker of Birkin bags.