Bloomberg News

European Stocks Rise on Greece Austerity Vote; LSE, Lloyds Rally

June 30, 2011

June 30 (Bloomberg) -- European stocks rose, posting the biggest two-day gain for the Stoxx Europe 600 Index in almost seven months, as Greek lawmakers approved a bill authorizing austerity measures, qualifying the country for further aid.

London Stock Exchange Group Plc jumped 11 percent after scrapping its bid for TMX Group Inc. and UBS AG said the bourse may now be a bid target. Lloyds Banking Group Plc surged 9.7 percent after the U.K.’s biggest mortgage lender said it will make savings of 1.5 billion pounds ($2.4 billion) by 2014.

The Stoxx 600 rose 1.1 percent to 272.86 at the 4:30 p.m. close in London for the biggest two-day gain since December. The gauge has lost 1.1 percent this quarter, snapping three quarters of gains, on concern that Greece will fail to repay all its debt. The benchmark measure fell 2.9 percent in June.

“The recent pullback provides a buying opportunity,” said Robert Buckland, chief global equity strategist at Citigroup Inc. in London in a report to clients today. “Despite a slowdown, we expect the economic and earnings recovery to be sustained.”

National benchmark indexes rose in every western European market. France’s CAC 40 Index and the U.K.’s FTSE 100 Index rose 1.5 percent, while Germany’s DAX Index gained 1.1 percent.

Greece Austerity Debate

Greek Prime Minister George Papandreou won a second ballot to execute measures ranging from tax increases to asset sales today after he clinched victory on a bill setting out his strategy to cut the deficit yesterday. A total of 155 lawmakers in the 300-seat parliament supported the law.

The U.S. Federal Reserve will complete its $600 billion bond-purchase program today. The Standard & Poor’s 500 Index has surged 24 percent since Fed Chairman Ben S. Bernanke’s Aug. 27 speech in Jackson Hole, Wyoming, when he indicated that the central bank would start a second round of bond purchases, known as quantitative easing or QE, to help stimulate the economy.

By contrast, Europe’s Stoxx 600 has climbed 8.6 percent as sovereign-debt concern limited gains. The benchmark gauge has dropped 1.1 percent so far this year, while the S&P 500 has rallied 5 percent.

European stocks extended gains after the Institute for Supply Management-Chicago Inc. said today its business barometer unexpectedly rose to 61.1 in June from 56.6 in May. Figures greater than 50 signal expansion.

LSE Shares Rally

LSE jumped 11 percent to 1,061 pence, the highest price in three years, after the London and Toronto exchanges said they won’t proceed with their friendly C$3.29 billion ($3.4 billion) merger because they didn’t get the required two-thirds of votes cast by proxy before today’s shareholder meeting.

LSE’s failed bid marks the third time in two months that one of the world’s biggest equity venues failed to complete a deal aimed at restoring growth.

Analysts at UBS AG added LSE to their mergers and acquisitions watch list, saying that the London exchange may now become a bid target. The brokerage said there is a good chance Nasdaq OMX Group Inc. could offer as much as 1,150 pence a share for LSE.

Lloyds surged 9.7 percent to 49 pence after Britain’s largest mortgage lender said the savings will come from fewer management posts, centralizing some functions and withdrawing from more than 15 of its overseas units.

BG, Galp, Repsol

BG Group Plc soared 4.7 percent to 1,414 pence after the U.K.’s third-largest oil and gas producer doubled its estimate of reserves and resources in the Santos Basin in Brazil to about 6 billion barrels of oil equivalent net to the company.

BG along with partners, Petroleo Brasileiro SA, Galp Energia SGPS SA and Repsol YPF SA plan to pump 2.3 million barrels of oil equivalent a day by 2017 off Brazil after they committed to a $13 billion investment program last year.

Galp rallied 6.5 percent to 16.45 euros in Lisbon, while Repsol jumped 3.2 percent to 23.94 euros in Madrid.

Taylor Wimpey Plc jumped 3.4 percent to 37.8 pence after Britain’s second-biggest homebuilder by volume said its U.K. operation is headed for a double-digit earnings before interest and taxes margin in 2012.

K+S AG, Europe’s biggest potash producer, dropped 1.3 percent to 53 euros and Yara International ASA, the largest maker of nitrogen fertilizers, slid 4.2 percent to 303.70 kroner as a U.S. Department of Agriculture report showed that U.S. grain acreage and inventories topped analysts’ estimates.

Renewable Energy Corp. ASA dropped 3.2 percent to 9.28 kroner after Deutsche Bank AG downgraded the maker of solar- energy products to “sell” from “hold.”

--With assistance from Corinne Gretler in Zurich. Editors: Will Hadfield, Andrew Rummer

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

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


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