Bloomberg News

European Stocks Rally as Greek Lawmakers Pass Austerity Package

June 29, 2011

June 29 (Bloomberg) -- European stocks rallied the most in three months as Greek lawmakers passed a package of austerity measures needed to secure the next tranche of European Union financial aid.

Charter International Plc soared 28 percent as Melrose Plc said it made a preliminary approach about a possible takeover offer for the engineering company. Salvatore Ferragamo SpA surged 11 percent on its first day of trading. ITV Plc and ICAP Plc surged more than 6 percent amid speculation they may become bid targets.

The Stoxx Europe 600 Index rose 1.7 percent to 269.8 at the 4:30 p.m. close in London, the biggest gain since March 21. The gauge has still tumbled 7.3 percent from its peak this year on Feb. 17 as investors speculated that Greece will fail to repay all its debt. The drop left the measure trading at the cheapest valuation compared with reported profits since 2008 last week, according to data compiled by Bloomberg.

The Greek vote means “one problem has been removed, so it’s an element of support for the stock market,” said Guillaume Duchesne, an equity strategist at BGL BNP Paribas SA in Luxembourg. “That gives a boost to stocks linked to economic growth.”

National benchmark indexes rose in all 18 western European markets, except Iceland. France’s CAC 40 advanced 1.9 percent, while the U.K.’s FTSE 100 rose 1.5 percent and Germany’s DAX increased 1.7 percent. Greece’s ASE climbed 0.5 percent, paring gains after the vote in Parliament.

Greek Plan

Greek Prime Minister George Papandreou clinched enough votes today to pass the first part of an austerity plan aimed at meeting EU aid requirements and staving off default for his debt-laden nation.

After gaining 155 votes in the 300-seat Parliament, Papandreou is now on track to secure a bill setting out the strategy for a 78 billion-euro ($112 billion) package of budget cuts and asset sales. There will be a second vote tomorrow that authorizes implementation of the measures, which are required to secure a fifth loan payment from last year’s 110 billion-euro rescue by the EU and International Monetary Fund.

The plan “is a good one,” said Pierre Mouton, a fund manager at Notz Stucki & Cie. in Geneva, who helps oversee $7 billion. “This gives investors a bit of optimism and allows us to concentrate more on companies and earnings instead of the geopolitical environment. Earnings season will start soon and results will be pretty good.”

Earnings Season

Alcoa Inc., the largest aluminum producer in America, will unofficially kick off the second-quarter U.S. earnings season on July 11. Profits at S&P 500 companies will gain 13 percent in the second quarter and 20 percent in 2011 from the year-earlier periods, according to analyst estimates compiled by Bloomberg.

A report today showed more Americans than forecast signed contracts in May to buy previously owned homes, signaling the residential real estate market may be rebounding from a slump earlier in the year. The index of pending home resales rose 8.2 percent from April, the National Association of Realtors said.

Charter soared 28 percent to 787 pence, the biggest gain since 2000, as Melrose said it made a preliminary approach about a possible 1.3 billion-pound ($2 billion) takeover offer. Melrose, the U.K. investment firm run by a former team at industrial company Wassall Plc, added 3 percent to 355 pence.

ITV, the U.K.’s biggest commercial broadcaster, jumped 6.6 percent to 71.95 pence after rallying more than 5 percent in the last hour of trading.

ITV Bid Speculation

“We’ve seen a bit of activity in ITV towards the latter part of the day,” said Kishan Mandalia, a sales trader at City Index in London. “I did hear some bid speculation on ITV for 110 to 120 pence per share and RTL Group was named.”

ITV spokesman Mike Large said he couldn’t immediately comment while RTL spokesman Oliver Herrgesell declined to comment.

ICAP, the world’s biggest broker of trades between banks, surged 9.7 percent to 478.8 pence, the largest increase since February 2010. The shares had lost 18 percent this year through yesterday.

“There has been some talk about ICAP being bought out again, but we have heard this in the past,” said Atif Latif, a director of trading at Guardian Stockbrokers in London. “On a more fundamental view, they have been sold off over the last few months.”

Mike Sheard, a spokesman at ICAP, declined to comment.

Ferragamo IPO

Ferragamo jumped 11 percent to 9.95 euros as the Italian luxury shoemaker’s debuted on the Milan exchange after raising 344.5 million euros in an initial public offering.

Allianz SE, Europe’s biggest insurer, increased 3.1 percent to 94.91 euros as the stock was upgraded to “overweight” from “equal weight” at Morgan Stanley.

Nobel Biocare AG, the second-largest maker of dental implants by sales, climbed 2.4 percent to 16.91 francs and Wacker Chemie AG advanced 3 percent to 149.05 euros as UBS AG upgraded both companies to “buy” from “neutral.”

A gauge of basic-resource shares in the Stoxx 600 climbed to a four-week high as metal prices rose. Eramet SA, operator of the world’s largest ferronickel smelter, added 6.3 percent to 224.65 euros. Outokumpu Oyj, a Finnish steelmaker, increased 5.1 percent to 8.95 euros.

Antofagasta Plc climbed 4.8 percent to 1,365 pence. The copper producer controlled by Chile’s Luksic family sees “huge demand” for metals as China and other emerging markets invest in infrastructure and urbanization, Chief Executive Officer Jean Paul Luksic said in an interview in London.

Meyer Burger Technology Ltd. climbed 3.9 percent to 36.35 francs. The company said it won a contract worth 160 million francs ($191 million) from GCL-Poly Energy Holdings Ltd. to supply high-precision wire saws and wafer inspection systems.

Senior Plc, a U.K. maker of air ducts for Boeing Co. and Airbus SAS planes, jumped 8.3 percent to 176 pence after saying pretax profit this year will exceed its forecasts.

--Editor: Andrew Rummer

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net.


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