Bloomberg News

European Stocks Rise as Bernanke Says Fed Prepared for Action

July 13, 2011

July 13 (Bloomberg) -- European stocks rose, halting three days of losses for the benchmark Stoxx Europe 600 Index, as Federal Reserve Chairman Ben S. Bernanke said the central bank is prepared to take additional action to support the economy.

Bayerische Motoren Werke AG advanced 4.4 percent as Exane BNP Paribas upgraded the world’s biggest maker of luxury cars. Burberry Group Plc surged 6.5 percent as the U.K.’s largest luxury-goods maker reported first-quarter sales that beat analysts’ estimates. ASML Holding NV tumbled 2.7 percent after Europe’s biggest semiconductor-equipment maker reported second- quarter orders that missed its own forecast.

The Stoxx 600 surged 0.7 percent to 269.94 at the 4:30 p.m. close in London. The gauge had fallen 2.8 percent over the past three days as investors speculated that the euro area’s sovereign-debt crisis would spread to the bigger economies of Italy and Spain. The benchmark measure has still declined 7.3 percent from this year’s high on Feb. 17.

“Investors are realizing the selloff early in the week on Italy was overdone as the Italian economy is much stronger than the other PIIGS countries,” said Witold Bahrke, a senior strategist at Copenhagen-based PFA Pension A/S, which manages $45 billion. “Italy is on track with its budget and is the world’s third-largest bond market, so there’s a lot of private support out there to keep Italy from spinning into the ground.”

National benchmark indexes in 16 out of 18 western European markets advanced. The U.K.’s FTSE 100 Index jumped 0.6 percent and France’s CAC 40 Index increased 0.5 percent, while Germany’s DAX Index rallied 1.3 percent.

‘Additional Policy Support’

Bernanke told Congress the central bank is prepared to take additional action, including buying more government bonds, if the economy appears in danger of stalling.

“The possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might reemerge, implying a need for additional policy support,” Bernanke said in prepared testimony to the House Financial Services Committee in Washington today. “The Federal Reserve remains prepared to respond should economic developments indicate that an adjustment of monetary policy would be appropriate.”

China said that its economy and industrial output expanded more than analysts had predicted. Gross domestic product rose 9.5 percent in the second quarter from a year earlier, the statistics bureau said in Beijing. That beat the median estimate of 18 economists in a Bloomberg News survey for an increase of 9.3 percent. Industrial output advanced 15.1 percent in June, the most since May 2010.

Mining Companies Rise

Metals including nickel, tin and zinc rallied on the London Metals Exchange. Fresnillo Plc, the world’s largest primary silver producer, surged 5.6 percent to 1,520 pence after announcing that it will produce 10 million ounces of silver and 50,000 ounces of gold in 2015 from its Saucito mine in north- central Mexico. Kazakhmys Plc climbed 4 percent to 1,365 pence.

Ireland joined Portugal and Greece as the third euro-area nation to have its credit rating reduced to below investment grade after the close of European markets yesterday. Moody’s cut Ireland to Ba1 from Baa3, saying that the country may need additional European Union financing.

“We’re entering a new phase where global growth will accelerate again,” said Bo B. Christensen, chief analyst at Copenhagen-based Danske Capital, which has 90 billion euros ($127.5 billion) under management. “Because growth in the global economy has eased, there’s been plenty of space for investors to care about the troubles in Greece and Portugal. When growth returns, news on the European sovereign-debt crisis will attract less attention.”

BMW, Daimler Gain

BMW surged 4.4 percent to 70.18 euros as Exane raised its recommendation on the carmaker to “neutral” from “underperform.” Separately, Morgan Stanley lifted its share- price estimate to 72 euros from 66 euros.

Daimler AG, the maker of Mercedes trucks and luxury cars, rose 2.9 percent to 53.17 euros. Morgan Stanley increased its estimate for the company’s shares to 68 euros from 62 euros.

Burberry soared 6.5 percent to 1,531 pence after posting revenue in the three months ended June 30 that surged 30 percent to 367 million pounds ($591 million). That beat the average estimate of 11 analysts compiled by the company for sales of 344 million pounds. Hermes International, the maker of the Birkin bag, jumped 3.8 percent to 222.05 euros, its highest price since at least 1993.

ASML slipped 2.7 percent to 25 euros after Europe’s biggest semiconductor-equipment maker forecast that third-quarter orders will probably not exceed 500 million euros. The company also reported second-quarter orders of 840 million euros, missing its own prediction of as much as 1 billion euros.

L’Oreal, Marks & Spencer

L’Oreal SA, the world’s biggest cosmetics maker, declined 3.4 percent to 84.94 euros after reporting that second-quarter sales rose 0.9 percent to 4.99 billion euros. That missed the average estimate of eight analysts surveyed by Bloomberg for sales of 5.07 billion euros.

Marks & Spencer Group Plc declined 2.5 percent to 363.8 pence after the U.K.’s largest clothing retailer said that first-quarter sales at stores in its domestic market open at least a year climbed 1.7 percent. That fell short of the average economists’ estimate for 2 percent growth.

--With assistance from Adria Cimino in Paris. Editors: Will Hadfield, Andrew Rummer

To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net.

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


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