Bloomberg News

Europe Stocks Rise as China Industrial Production Tops Estimates

June 14, 2011

June 14 (Bloomberg) -- European stocks rose, giving the Stoxx Europe 600 Index its first back-to-back gains in three weeks, as Chinese industrial production and U.S. retail sales topped forecasts.

Nokia Oyj climbed 1.6 percent after agreeing to settle all patent litigation with Apple Inc. in a deal that awards a one- off payment and royalties to the Finnish maker of mobile phones. Solarworld AG and Q-Cells SE advanced at least 4 percent after a report that LDK Solar Co., a Chinese maker of solar panels, seeks acquisitions in Germany.

The Stoxx 600 rallied 0.8 percent to 270.82 at the 4:30 p.m. close in London. The gauge has still fallen 7 percent from this year’s high on Feb. 17 amid concern that the U.S. economic recovery is slowing and as speculation grew that Greece may default on its debt. The measure had declined for six consecutive weeks, the longest stretch of losses since 2008.

“The consolidation phase in equities is close to its end,” Andrew Garthwaite, the head of global strategy at Credit Suisse Group AG in London, wrote in a report today. “We continue to be fundamentally bullish.” Garthwaite increased his tactical allocation in stocks to “overweight.”

National benchmark indexes advanced in all of the 18 western European markets, except Iceland. The U.K.’s FTSE 100 gained 0.5 percent, France’s CAC 40 rallied 1.5 percent and Germany’s DAX advanced 1.7 percent.

Chinese Economy

China’s industrial production rose more than estimated in May, while inflation accelerated to the fastest pace in almost three years. Production gained 13.3 percent from the year before, exceeding the median economist forecast of 13.1 percent in a Bloomberg survey. The 5.5 percent annual gain in consumer prices matched estimates.

China also raised the reserve requirement ratio for the nation’s banks by 50 basis points to cool inflation. The world’s second-biggest economy has boosted interest rates four times since September, increased bank reserve requirements to a record and allowed the yuan to gain about 1.6 percent against the dollar this year.

Stocks extended gains after U.S. retail sales topped estimates. The 0.2 percent decrease in May was smaller than the 0.5 percent median forecast of economists surveyed by Bloomberg.

Global investors increased their cash holdings to the highest in a year this month as hedge funds cut the level of borrowed money invested in stocks, a BofA Merrill Lynch Global Research survey showed.

Lowest Credit Rating

European finance chiefs began the final stage of hammering out a Greek rescue today to prevent the euro area’s first sovereign default after the country was slapped with the world’s lowest credit rating by Standard & Poor’s.

Meeting in Brussels in an emergency session before their monthly gathering next week, euro-area finance ministers are seeking to narrow differences on how investors share the cost of easing Europe’s biggest debt burden. They aim to wrap up a new financing plan at a government leaders’ summit on June 23-24, a year after Greece received its first bailout package.

S&P downgraded Greece’s credit rating to CCC from B late yesterday, saying “there is a significantly higher likelihood of one or more defaults.”

Nokia gained 1.6 percent to 4.36 euros, the biggest increase in more than a month. Apple will pay Nokia an undisclosed sum as well as royalties for the term of its agreement with the former biggest mobile-phone maker in the world. The agreement will bolster Nokia’s second-quarter non- IFRS operating margin forecast for its Devices & Services unit, the company said.

Solarworld Climbs

Solarworld advanced 4 percent to 9.45 euros, while Q-Cells jumped 6.5 percent to 1.73 euros. LDK Solar seeks acquisitions in Germany, Handelsblatt reported today, citing an interview with Chief Financial Officer Jack Lai. LDK prefers companies with technological knowledge and a good brand image, Lai told the newspaper.

Separately, U.S. rival GT Solar International Inc. raised its first-quarter revenue projection to $225 million from a range of $140 million to $150 million.

Renewable Energy Corp. ASA jumped 7.4 percent to 11.26 kroner as the maker of solar-energy products was raised to “neutral” from “sell” at UBS AG. Vestas Wind Systems A/S, the largest wind-turbine manufacturer, jumped 3 percent to 150.80 kroner as Societe Generale SA said in a report that the company may gain from a strong order flow.

Avis Europe Plc soared 58 percent to 310.7 pence, its biggest advance in more than two years, after agreeing to be acquired by Avis Budget Group Inc. for 636 million pounds ($1.04 billion).

Banks Gain

European bank stocks climbed as BofA Merrill Lynch advised buying shares in the industry. ING Groep NV rallied 3.2 percent to 8.17 euros. Royal Bank of Scotland Group Plc advanced 2.4 percent to 41.55 pence. Banco Santander SA and Danske Bank A/S, named among BofA Merrill Lynch’s top picks of bank stocks in today’s report, gained 2.5 percent to 7.86 euros and 2 percent to 102 kroner, respectively.

Glencore International AG, the world’s largest listed commodities trader, dropped 4.5 percent to 500 pence even after saying first-quarter profit increased. The earnings were “disappointing,” Paul Cliff, an analyst at Nomura Holdings Inc., wrote in an e-mailed note.

Eurasian Natural Resources Corp. fell 1.9 percent to 761.5 pence as Glencore said it isn’t planning a bid for the producer of metals in Kazakhstan.

--With assistance from Julie Cruz in Frankfurt and Adria Cimino in Paris. Editors: Andrew Rummer, 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


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