European Stocks Advance as Mining Shares Rally; Banks Retreat
March 29, 2011, 12:32 PM EDTBy Adam Haigh
March 29 (Bloomberg) -- European stocks rose for a fifth day, erasing losses for the Stoxx Europe 600 Index in the final hour of trade, as a rally in mining shares offset concern that banks will need to sell more shares to increase their capital.
BHP Billiton Ltd. and Vedanta Resources Plc climbed more than 2 percent as metal prices advanced in London. Unione di Banche Italiane ScpA tumbled by a record 12 percent after Italy’s fourth-biggest bank said it plans to offer new shares. Banco Popolare Scrl sank 6.3 percent as Goldman Sachs Group Inc. slashed its share price estimate 5.2 percent.
The Stoxx 600 benchmark gained 0.1 percent to 276.51 at the 4:30 p.m. close in London. The gauge has clawed back 5.5 percent since this year’s low on March 16 as investors speculated that Japan will prevent further radiation leaks from its earthquake- damaged nuclear plant.
“There are still plenty of worries, but the market seems to be taking it in stride,” said Lawrence Peterman, investment director at Eden Financial Ltd. Investors seem to be “looking at potential earnings and valuations that are not particularly expensive.”
Stocks in Europe limited gains today after Standard & Poor’s downgraded Portugal and Greece’s debt ratings. The ratings firm said that the European Union’s new bailout rules may mean both nations will eventually renege on their debt obligations.
S&P cut Portugal for the second time in a week to the lowest investment-grade rating of BBB-, while Greece’s rating fell two grades to BB-, three levels below investment grade.
European Indexes
National benchmark indexes climbed in eight of the 18 western European markets. The U.K.’s FTSE 100 Index gained 0.5 percent and France’s CAC 40 Index rose 0.3 percent, while Germany’s DAX Index lost 0.1 percent.
BHP paced a rally in mining shares as base metals increased on the London Metal Exchange. The world’s largest mining company gained 2.2 percent to 2,414.5 pence. Vedanta Resources Plc jumped 2.9 percent to 2,238 pence and Rio Tinto Group climbed 2 percent to 4,366 pence.
Separately, two people with knowledge of the matter said Rio Tinto is in talks to buy additional shares in Riversdale Mining Ltd. from Brazil’s Cia Siderurgica Nacional SA. Rio remains about 9 percent short of a controlling stake.
CSN, as the Brazilian steelmaker is known, wants to keep its stake in Riversdale, according to Chief Financial Officer Paulo Penido, who was speaking on a conference call with analysts today.
UBI Plunges
UBI slumped 12 percent to 6.03 euros as the lender proposed to sell as much as 1 billion euros ($1.4 billion) of shares, prompting analysts from Nomura Holdings Inc. to Societe Generale and Intermonte SIM SpA to downgrade the stock.
Chief Executive Officer Victor Massiah said the sale wasn’t requested by the Bank of Italy and would not be used for acquisitions.
“The European banking sector still needs capital and this process isn’t finished,” Philippe Gijsels, the Brussels-based head of research at BNP Paribas Fortis Global Markets, said in a telephone interview. “There’s added fragility with banks ahead of the stress tests.”
Banco Popolare, Italy’s third-biggest bank, sank 6.9 percent to 2.10 euros after Goldman Sachs cut its price estimate to 2.75 euros from 2.90 Euros.
A gauge of bank stocks on the Stoxx 600 fell 1.1 percent, the biggest drop among the 19 industry groups in the benchmark measure. Commerzbank AG, Germany’s second-largest lender, slid 4.3 percent to 5.52 euros.
BP Sinks
BP Plc fell 2.2 percent to 466.6 pence. Federal prosecutors may pursue manslaughter charges against BP managers for decisions made before the Gulf of Mexico oil-rig explosion last year that killed 11 workers and caused the world’s largest accidental oil spill, according to three people familiar with the matter.
Nordex SE lost 4.5 percent to 8.94 euros after the company said it sold about 6.7 million shares at 8.40 euros apiece, raising about 56 million euros.
Hugo Boss AG climbed 5.8 percent to 57.86 euros after the company forecast that currency-adjusted sales will rise at least 12 percent following “a successful start to 2011.” Hugo Boss also predicted that earnings before interest, taxes, depreciation and amortization and excluding special items will climb at least 15 percent this year.
Wolseley gained 3.1 percent to 2,154 pence after fiscal first-half earnings before one-off items jumped to 275 million pounds ($439.5 million) after cutting costs and generating higher sales volumes. CA Cheuvreux analysts had predicted so- called trading profit of 241 million pounds, while Liberum Capital Ltd. had estimated 235 million pounds.
Groupe Eurotunnel SA, which operates the undersea rail link between England and France, increased 4.2 percent to 7.49 euros after Morgan Stanley upgraded the shares to “overweight” from “equal weight.”
Babcock International Group Plc climbed 3.8 percent to 600 pence as the company said trading for the full year is “consistent” with its expectations.
--With assistance by Sarah Jones and Alexis Xydias in London. Editor: Will Hadfield
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
