European Stocks Advance for a Second Day as ABB GainsNamitha Jagadeesh
European stocks advanced, posting their biggest two-day rally in almost 16 months, as speculation the European Central Bank will boost stimulus outweighed some worse-than-estimated earnings reports.
The Stoxx Europe 600 Index gained 0.7 percent to 326.11 at the close, after earlier falling 0.5 percent. The benchmark measure rallied 2.1 percent yesterday as the ECB was said to buy covered bonds for a second day and Reuters reported that the central bank is considering corporate-debt purchases.
“The ECB buying bonds is just speculation, but investors are thinking there’s no smoke without fire, so the sentiment is better,” said Christian Stocker, a strategist at UniCredit Bank AG in Munich. “We’ve seen some disappointments in earnings and profit forecasts. Expectations have been very low. The third quarter was bad for the economy in Europe. Because of economic uncertainty, it’s currently more important to look at earnings at cyclical companies for the next developments.”
ABB Ltd. rose 2.5 percent after reporting third-quarter profit that exceeded analysts’ estimates. GlaxoSmithKline Plc advanced 2.6 percent after posting better-than-forecast profit. British American Tobacco Plc fell after saying cigarette shipments fell further in the first nine months of the year.
In the past four weeks, European stocks led a rout that helped erase as much as $5.5 trillion from equities worldwide amid concern that a potential recession in the region would undermine growth as the Federal Reserve winds down its asset-purchase program.
The Stoxx 600 rebounded 4.4 percent since its low last week through yesterday as the ECB returned to the market, buying Italian covered bonds. The central bank purchased short-dated French notes and Spanish securities the day before. Reports tomorrow may show gauges for euro-area manufacturing, services and consumer confidence weakened in October, economists’ estimates show, strengthening the case for more stimulus.
“Investors are waiting for tomorrow’s manufacturing and services data,” UniCredit’s Stocker said. “There are hopes that the fourth quarter will be better than the third.”
The recent selloff hurt stocks from Portugal, Italy and France the most, with their national benchmark indexes falling more than 7 percent this month.
All 18 national benchmark indexes in western Europe gained today, except Greece. The FTSE MIB Index climbed 1.1 percent and CAC 40 Index rose 0.6 percent.
ABB advanced 2.5 percent to 20.25 Swiss francs. The world’s biggest maker of power grids reported quarterly net income of $734 million, beating the $692 million average analyst estimate.
GlaxoSmithKline added 2.6 percent to 1,377 pence after reporting third-quarter profit excluding some items of 27.9 pence per share, exceeding the average analyst estimate of 24.1 pence. The U.K.’s biggest drugmaker also said it will return 4 billion pounds ($6.42 billion) to shareholders in 2015.
Husqvarna AB rallied 7.6 percent to 52.10 kronor after the maker of powered garden tools reported profit that beat estimates.
A gauge personal and household-goods companies on the Stoxx 600 was little changed after falling as much as 1.2 percent. BAT dropped 2.6 percent to 3,375 pence. Societe Bic SA tumbled 8 percent to 96 euros after the maker of pens and pencils posted worse-than-forecast third-quarter sales.
Nordea Bank AB lost 1.1 percent to 90.80 kronor. The Nordic region’s largest lender reported third-quarter net income of 938 million euros ($1.19 billion), trailing the 1.19 billion-euro estimate of analysts in a Bloomberg survey.
Heineken NV declined 1 percent to 57.60 euros after the Dutch brewer posted third-quarter revenue that rose less than analysts had projected.