Bloomberg News

European Stocks Post Biggest Four-Day Gain Since November 2008

October 10, 2011

Oct. 10 (Bloomberg) -- European stocks advanced, with the Stoxx Europe 600 Index posting its biggest four-day rally since November 2008, as the leaders of Germany and France gave themselves three weeks to create a plan to recapitalize banks.

BP Plc contributed the most to the gauge’s advance. Premier Oil Plc rose 3.3 percent after HSBC Holdings Plc upgraded its shares. Erste Group Bank AG plunged 9.2 percent after saying it will post a full-year loss because of writedowns at its units in Hungary and Romania. Dexia SA dropped 4.7 percent after earlier falling as much as 36 percent when trading in the shares resumed.

The benchmark Stoxx 600 advanced 1.7 percent to 235.94 at the 4:30 p.m. close in London, extending the gauge’s rally over the last four days to 8.5 percent. National benchmark indexes rose in 15 of the 18 western European markets. The U.K.’s FTSE 100 Index gained 1.8 percent. France’s CAC 40 Index climbed 2.1 percent and Germany’s DAX Index jumped 3 percent. All three gauges posted their biggest four-day rallies since 2008.

“I believe they will come up with something,” Andy Brough, executive director at Schroder Investment Management Ltd. in London, which has about $324 billion in assets under management, said in a Bloomberg Television interview. “What the market wants to see is can we get a position and move forward.”

Angela Merkel and Nicolas Sarkozy, racing to stamp out the sovereign-debt crisis that threatens to engulf the financial system, set an end-of-October deadline to devise a plan to recapitalize banks, get Greece on the right track and fix Europe’s economic governance.

Recapitalizing Lenders

“By the end of the month, we will have responded to the crisis issue and to the vision issue,” France’s president said in Berlin yesterday at a joint briefing with the German chancellor before they dined at her office. Sarkozy said they will deliver a plan by the Nov. 3 Group of 20 summit.

The Stoxx 600 advanced 2.6 percent last week as the Bank of England expanded its bond-purchase program and after Merkel said she’s ready to discuss recapitalizing lenders. The gauge has still retreated 19 percent since this year’s high on Feb. 17 and is trading at 9.9 times its companies’ estimated earnings, near the cheapest since March 2009, according to data compiled by Bloomberg.

BP gained 2.9 percent to 405.15 pence as Europe’s second- largest oil company made the biggest contribution to the Stoxx 600’s rally.

Premier Oil Plc gained 3.3 percent to 372.4 pence. HSBC lifted its recommendation on the stock to “overweight” from “underweight.”

Petroleum Geo-Services ASA and Aker Solutions ASA surged 11 percent to 63.50 kroner and 10 percent to 59.60 kroner, respectively.

Ferrovial Shares Surge

Ferrovial SA advanced 6.5 percent to 9.08 euros. The company agreed to sell 5.9 percent of BAA’s parent company, FGP Topco Ltd. to Alinda Capital Partners for 280 million pounds ($439 million), reducing its indirect holding in the owner of London’s Heathrow airport to 49.99 percent.

Maurel SA rallied 5.5 percent to 13.42 euros. The company said it has found oil sandstones at a well at the Sabanero license in Colombia and oil samples taken have confirmed the field extension to the north east. In a statement, Maurel said it will drill three more wells in 2011 and 2012.

ABB Ltd., the world’s largest maker of power-transmission gear, added 3.5 percent to 16.99 Swiss francs. Jefferies Group Inc. raised its recommendation on the company’s shares to “buy” from “hold.”

Erste Group, eastern Europe’s second-biggest lender, slumped 9.2 percent to 18.80 euros. The bank said it will post a full-year loss of as much as 800 million euros ($1.1 billion) after writedowns at its Hungarian and Romanian units.

Raiffeisen Bank International AG, eastern Europe’s third- biggest lender, plunged 4.7 percent to 21.20 euros.

Dexia Resumes Trading

Dexia dropped 4.7 percent to 80.5 euro cents after agreeing to a breakup plan. The Belgian federal government will pay 4 billion euros for the local unit and guarantee 60 percent of a so-called bad bank that Dexia will set up for its troubled assets, Finance Minister Didier Reynders said. The sale will cut Dexia’s short-term funding requirement by more than 14 billion euros, the French-Belgian bank said.

Dexia will sell assets, including its Luxembourg unit and its French municipal-lending arm, to give the bad bank capital to absorb future losses. Dexia’s breakup became inevitable after its short-term funding evaporated.

Konecranes Oyj sank 2.2 percent to 14.97 euros. The company cut its forecast for full-year operating profit, excluding restructuring costs, saying it will be flat compared with last year. The company had predicted an increase in operating profit this year.

CSM NV slumped 20 percent to 11.22 euros, the largest plunge since November 2008, after the company said that its second-half earnings will fall short of its forecasts. The world’s biggest maker of bakery ingredients also said it plans to reduce costs by 50 million euros.

--With assistance from Francine Lacqua in London and Corinne Gretler in Zurich. Editor: Will Hadfield

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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