Bloomberg News

European Stocks Advance for Second Day; Rio, RBS, Ipsen Climb

August 30, 2011

Aug. 30 (Bloomberg) -- European stocks rose for a second day as a rally in mining companies and U.K. banks outweighed a bigger-than-forecast decline in U.S. consumer confidence.

Rio Tinto Group pushed a gauge of basic-resources producers to the biggest increase in almost three weeks. Royal Bank of Scotland Group Plc and Barclays Plc climbed more than 6 percent. Ipsen SA, the French maker of a Botox rival, and Bunzl Plc, the world’s biggest distributor of disposable tableware and food packaging, each surged 7.9 percent as earnings gained.

The Stoxx Europe 600 Index rose 1 percent to 230.64 at the 4:30 p.m. close in London, the highest in almost two weeks. The gauge has still tumbled 13 percent this month, the biggest drop since October 2008, as European and U.S. economic reports trailed forecasts, adding to concern that the economic recovery is at risk. The decline has left the measure trading at about 9.6 times estimated earnings, near the cheapest since March 2009, data compiled by Bloomberg show.

“Given the sharp drop in equities in August, I think even a moderate recession is now priced in and should not scare investors,” said Mikio Kumada, a global strategist at LGT Capital Management in Singapore. “Even very sluggish growth will now suffice for equities to find a bottom and even rally for a while, though it will take time for the markets to reclaim old highs.”

U.K. Leads Advance

Today’s gains in the Stoxx 600 were led by U.K. equities that missed out on yesterday’s rally because of a holiday. The Euro Stoxx 50 Index of the biggest companies in the euro area, which excludes British shares, slipped less than 0.1 percent, while the U.K.’s FTSE 100 Index rallied 2.7 percent.

Equities in Europe pared their gains as a report showed confidence among U.S. consumers plunged in August to the lowest in more than two years. The Conference Board’s index slumped to 44.5, the weakest since April 2009, from a revised 59.2 reading in July. Economists had predicted the gauge would fall to 52, according to the median forecast in a Bloomberg survey.

The Federal Reserve is releasing minutes from its most recent policy meeting after European markets close today. Chairman Ben S. Bernanke said on Aug. 26 in Jackson Hole, Wyoming, that the economy isn’t deteriorating enough to warrant any immediate stimulus and the central bank still has tools to stimulate growth.

“In the short-term, the markets can still continue the relief rally,” said Manfred Hofer, senior investment analyst at LGT Capital Management AG in Pfaeffikon, Switzerland. “Going forward, however, old topics such as the European debt crisis or fears of recession will move into focus again.”

Greek Aid Deal

European governments will seal an agreement on collateral for Greece’s second aid package by mid-September, Luxembourg Prime Minister Jean-Claude Juncker said late yesterday in Brussels. Euro-area governments will need to transfer additional sovereign functions to the European Union if they want to establish an economic government, he told German state broadcaster ZDF in an interview.

National benchmark indexes advanced in 13 of the 18 western European markets. France’s CAC 40 Index rose 0.2 percent while Germany’s DAX Index slipped 0.5 percent. The Swiss Market Index was little changed.

A gauge of basic-resources companies climbed 4 percent as Rio Tinto, the world’s second-largest mining company, rallied 4.3 percent to 3,673.5 pence. BHP Billiton Ltd., the biggest mining company, increased 4.3 percent to 2,042.5 pence while Xstrata Plc added 4.7 percent to 1,025.5 pence.

Lonmin, Anglo American

Lonmin Plc, the world’s third-biggest platinum producer, gained 8.5 percent to 1,275 pence. Anglo American Plc, part owner of the world’s biggest platinum and diamond producers, climbed 6.3 percent to 2,483 pence and Antofagasta Plc, the copper producer controlled by Chile’s Luksic family, gained 6.1 percent to 1,282 pence.

Copper advanced to a three-week high in New York as optimism for U.S. economic growth supported demand for industrial metals.

RBS, Britain’s biggest government-controlled bank, jumped 8 percent to 23.64 pence and Barclays surged 6.7 percent to 165.4 pence. Lloyds Banking Group Plc, the nation’s largest mortgage lender, rose 7.8 percent to 32.03 pence.

Jason Napier and David Lock, analysts at Deutsche Bank AG, upgraded RBS to “buy” from “hold”, writing in a report that last month’s drop was overdone and they “expect strong management will continue to deliver value and earnings and capital formation will surprise positively.” They also named Barclays as their top pick.

Ipsen, Bunzl Gain

Ipsen rallied 7.9 percent to 23.89 euros, the biggest gain since January, after reporting first-half net income that rose 22 percent to 91.7 million euros. The average analyst estimate was 78.8 million euros. The company also said it’s targeting recurring adjusting operating income, excluding currency movements, of between 190 million and 200 million euros in 2011.

Bunzl gained 7.9 percent to 779 pence after the company said first-half pretax profit increased 12 percent to 112.1 million pounds ($184 million) on higher revenue. Bunzl also said that it agreed to buy Majestic Products BV, a Netherlands-based personal-protection equipment business.

Distribuidora Internacional de Alimentacion SA, the world’s third-largest discounter, gained 6.2 percent to 2.81 euros. The company reported first-half net income of 6.8 million euros, compared with a net loss of 15.9 million euros a year earlier.

Public Power Corp SA, Greece’s biggest electricity producer, plunged 8.8 percent to 6.21 euros after first-half profit fell to 128.8 million euros from 347.9 million euros a year ago.

Baloise Holding AG, Switzerland’s third-largest insurer, dropped 2 percent to 69.6 Swiss francs. Net income in the first six months of the year slipped 2.4 percent to 203.3 million francs ($249 million) as the Swiss currency strengthened against the euro.

--With assistance from Adria Cimino in Paris. Editor: Andrew Rummer

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

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


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