Bloomberg News

European Stocks Post Biggest Weekly Gain in 14 Months; Axa Jumps

September 30, 2011

Oct. 1 (Bloomberg) -- European stocks posted the largest weekly gain in 14 months, paring a quarterly loss, as German backing for an enhanced euro-area rescue fund eased concern that policy makers will be unable to contain the debt crisis and U.S. jobs and growth data beat forecasts.

Allianz SE and Axa SA led a gauge of insurers to the biggest jump since March 2009. Societe Generale SA, France’s second-largest bank, and KBC Groep NV, Belgium’s biggest lender by market value, climbed more than 20 percent. Lundin Petroleum AB soared 44 percent after increasing its estimate of recoverable resources for an oil prospect.

The Stoxx 600 Europe Index advanced 4.6 percent to 226.18 this week, the biggest gain since July 2010. The measure still lost 17 percent in the third quarter, the most since the final period of 2008, which followed Lehman Brothers Holdings Inc.’s collapse. The gauge has fallen for five straight months amid concern Greece’s debt crisis will spread to other countries in the region and as reports indicated a slowdown in the economy.

“German lawmakers’ positive vote as well as some good economic data coming from the other side of the pond were well received by market participants,” said Stephane Ekolo, chief European strategist at Market Securities in London.

Germany’s lower house of parliament approved the expansion of the European Financial Stability Facility’s firepower on Sept. 29, raising Germany’s guarantees to 211 billion euros ($286 billion) from 123 billion euros. Lawmakers in the Bundestag voted 523 in favor of the measure, while 85 voted against; three abstained.

‘Political Elements’

The vote in Germany “supported the market this week,” said Guillaume Duchesne, an equity strategist at BGL BNP Paribas SA in Luxembourg. “Now we need confirmation of the political elements and positive economic elements for the trend to be sustainable.”

U.S. Treasury Secretary Timothy F. Geithner in an interview on ABC on Sept. 26 predicted that European governments will step up their response to the debt crisis after a chiding from counterparts around the world at meetings of the International Monetary Fund last weekend.

Policy makers in Europe now understand the severity of the problems and the actions that need to be taken, Pacific Investment Management Co.’s Mohamed A. El-Erian said in a radio interview on Sept. 27 on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt.

U.S. Growth

A Sept. 29 report showed a revised 1.3 percent increase in U.S. gross domestic product in the second quarter, compared with a 1 percent gain previously calculated. Applications for jobless benefits dropped by 37,000 in the week ended Sept. 24 to 391,000, the fewest since April, according to Labor Department figures. Both reports were better than economists’ estimates.

Data yesterday indicated confidence among U.S. consumers rose from the lowest level since November 2008 as pessimism about the economy eased. The Thomson Reuters/University of Michigan final index of consumer sentiment climbed to 59.4 last month, higher than forecast, from 55.7 in August.

National benchmark indexes rose in all of western Europe’s 18 markets. France’s CAC 40 added 6.1 percent, the U.K.’s FTSE 100 climbed 1.2 percent and Germany’s DAX jumped 5.9 percent.

Allianz and Axa, Europe’s biggest insurers, rallied 20 percent and 19 percent, respectively, the biggest gains in more than two years. Delta Lloyd NV, the publicly traded Dutch insurance unit of Aviva Plc, soared 20 percent.

Banks Climb

Societe Generale gained 20 percent, the biggest increase since March 2009, while BNP Paribas SA, France’s biggest lender, climbed 19 percent. KBC advanced 26 percent.

Lundin Petroleum surged 44 percent, the most on record. The company increased its estimate of recoverable resources for the North Sea Avaldsnes prospect, part of a discovery that now ranks among Norway’s five biggest offshore finds. Lundin raised its estimate for production license 501 to 800 million to 1.8 billion barrels of recoverable oil.

Hennes & Mauritz AB added 9.2 percent, the most since 2008, as Europe’s second-largest clothing retailer reported earnings that beat estimates. Operating profit fell 17 percent to 4.71 billion kronor ($700 million) in the three months ended Aug. 31, topping the average of 17 analyst estimates compiled by Bloomberg for income of 4.35 billion kronor.

Man Group Plc tumbled 27 percent, the biggest drop since it first sold shares in 1994. The world’s biggest hedge fund said on Sept. 28 its assets under management will decline by $6 billion amid “suppressed” demand for investment products.

Luxury Goods Decline

Luxury goods makers fell after a Bloomberg survey showed on Sept. 29 that most global investors predict Chinese growth will slow to less than 5 percent by 2016.

“Market participants are starting to get wary about Chinese economic prospects,” Market Securities’ Ekolo said.

LVMH Moet Hennessy Louis Vuitton SA, the world’s biggest luxury goods company, slipped 5.5 percent. The company makes 25 percent of its revenue in Asia, according to Bloomberg data. Swatch Group AG, that watchmaker that makes 51 percent of its sales in Asia, slid 12 percent.

A gauge of Chinese manufacturing shrank for a third month in September, the longest contraction since 2009, as measures of new orders and export demand declined. A reading of 49.9 for the purchasing managers’ index, released by HSBC Holdings Plc and Markit Economics yesterday, was unchanged from August and compared with a preliminary figure of 49.4.

--Editor: Andrew Rummer, Srinivasan Sivabalan

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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