European Stocks Rise on Federal Reserve Stimulus Optimism
European stocks advanced to an 18- month high amid speculation the U.S. Federal Reserve will expand stimulus measures and as German investor confidence in November beat forecasts.
ThyssenKrupp AG (TKA), Germany’s biggest steelmaker, jumped 5.6 percent after saying the sale of its Steel Americas unit is on track. Suez Environnement (SEV) Co. climbed the most in more than three months after GDF Suez Chief Executive Officer Gerard Mestrallet said his company will retain its stake in Europe’s second-largest water utility. Diageo (DGE) Plc slid 1.6 percent after it ended talks to acquire the Jose Cuervo tequila brand.
The Stoxx Europe 600 Index (SXXP) rose 0.3 percent to 280.49 at the close of trade, its seventh day of gains and longest winning streak in 17 months. The gauge advanced to its highest since May 2011 and has increased 15 percent this year as the European Central Bank announced an unlimited bond-buyback program and confidence grew that U.S. lawmakers will avoid fiscal deadlock.
“The main focus is the Fed meeting,” Markus Huber, head of German sales trading at ETX Capital in London, said in a telephone interview. “A majority expect the Fed to increase its bond-purchase program, in terms of the amount that they buy each month. The Fed is concerned that with the fiscal cliff, the economy could be negatively impacted so it may consider more stimulus.”
The Federal Reserve begins a two-day meeting today after which it will announce its interest-rate decision and updated economic projections. The Fed may supplement $40 billion a month of mortgage-bond purchases with Treasury purchases, according to a Bloomberg survey of economists.
U.S. lawmakers need to agree on a budget to prevent more than $600 billion of automatic tax increases and spending cuts from coming into effect next year.
Germany’s ZEW Center for European Economic Research said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, rose to 6.9 in December from minus 15.7 in November. Economists forecast a gain to minus 11.5, according to the median of 38 estimates in a Bloomberg News survey.
National benchmark indexes rose in all of the 18 western European markets. France’s CAC gained 0.9 percent, the U.K.’s FTSE 100 climbed 0.1 percent, while Germany’s DAX advanced 0.8 percent.
ThyssenKrupp added 5.6 percent to 17.18 euros. Chief Executive Officer Heinrich Hiesinger said the company sees a solution for its Steel Americas units by the end of next year.
Germany’s biggest steelmaker said its net loss widened to 4.7 billion euros ($6.1 billion) in the year ended Sept. 30 from 1.29 billion euros a year earlier. It also canceled its annual dividend.
Suez Environnement rose 8.3 percent to 9.01 euros, its biggest gain since Aug. 26, after Mestrallet said his company won’t reduce its 34 percent stake even though an investor pact that lapses in July ensuring control of the water utility won’t be renewed.
The stock was raised to outperform, the equivalent of buy, from neutral at Exane BNP Paribas.
Whitbread Plc (WTB), the owner of Premier Inn budget hotels and Costa Coffee shops, added 2.5 percent to 2,488 pence, its highest price in more than 20 years, after it said revenue growth accelerated. Sales at Costa outlets open at least a year rose 7.1 percent in the 13 weeks ended Nov. 29.
Diageo, the world’s biggest distiller, dropped 1.6 percent to 1,855.5 pence after it said it has ended talks about the future of the Cuervo brand with JB y Cia. SA de C.V. and Lanceros S.A. de C.V., and will now work to finish its 26-year- old agreement to distribute the brand outside of Mexico, which expires at the end of June.
KBC Groep NV (KBC) fell 4.8 percent to 22.34 euros after raising 1.25 billion euros from a share sale to maintain capital reserves amid accelerated reimbursements of state aid.
KBC sold 58.8 million shares at 21.25 euros apiece, according to a statement. That’s a 9.5 percent discount to the previous closing price of 23.47 euros and will dilute per-share earnings by more than 16 percent.
Tullow Oil Plc (TLW) tumbled 8.4 percent to 1,150 pence, its lowest level in more than 15 months, after it agreed to buy Norway’s Spring Energy AS for $372 million, and said it would sell its North Sea holdings.
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