Bloomberg News

European Stocks Gain for Third Week on Policy Action Optimism

October 14, 2011

Oct. 15 (Bloomberg) -- European stocks rose for a third week, their longest winning streak since April, on speculation that policy makers will increase efforts to contain the debt crisis as company earnings and U.S. retail sales beat estimates.

Carmakers and chemical companies led gains over the week, with Porsche AG and Syngenta AG climbing more than 6 percent. SAP AG, the largest maker of business-management software, and ASML Holding NV, Europe’s biggest chip-equipment maker, jumped after reporting better-than-estimated earnings.

The Stoxx Europe 600 Index advanced 2.8 percent to 238.51 this past week. The gauge has still retreated 18 percent since this year’s high on Feb. 17 on concern that Greece will default, pushing borrowing costs higher for other indebted euro-area countries. The gauge traded at 9 times its companies’ estimated earnings on Sept. 22, the cheapest since March 2009, according to data compiled by Bloomberg. The Stoxx 600 last increased for three consecutive weeks more than six months ago.

Group of 20 finance ministers met in Paris on Oct. 14 and Oct. 15 to discuss a rescue plan for Europe’s struggling economies. German Chancellor Angela Merkel and French President Nicolas Sarkozy set an end-of-October deadline to devise a plan to recapitalize banks and get Greece on the right track, Sarkozy said Oct. 9.

“They are not going to avoid a Greek default at any cost, but they prefer to capitalize banks,” said Giuseppe Distefano, who helps oversee 100 million euros ($139 million) as chief investment officer of Alessia Sicav in Luxembourg. “That helps remove the uncertainty originating in the Greek situation. That has been the main driver of the market rally.”

Spain Credit Downgrade

Standard & Poor’s cut Spain’s credit rating on Oct. 13 for the third downgrade in three years. New data showed the eight largest U.S. money-market funds almost halved their lending to French banks last month.

“With equity markets looking to post their best weekly gains in some time this improved sentiment is tempered somewhat by the propensity for European leaders to disappoint, when it comes to the crunch,” said Michael Hewson, a market analyst at CMC Markets in London.

Olli Rehn, the European Commissioner for Economic and Monetary Affairs, said in a speech in Dublin on Oct. 12 that the euro area is approaching a consensus on resolving its debt crisis and has a fairly good chance of averting calamity.

U.S. Retail Sales

In the U.S., retail sales rose in September more than forecast, the Commerce Department said on Oct. 14, easing concern that slumping confidence and scant hiring will derail the biggest part of the world’s largest economy.

Porsche rose 6.7 percent. The maker of the Cayenne sport- utility vehicle plans to sell a record 140,000 cars next year on demand for the next generation of the 911 and Boxster models, a person with knowledge of the matter said. Bayerische Motoren Werke AG, maker of the 3-Series sedan, advanced 11 percent.

Syngenta climbed 7.3 percent. The Basel, Switzerland-based chemicals maker forecast full-year revenue will rise “substantially” as the world’s largest maker of agricultural chemicals sees no drop-off in orders. Clariant AG, the world’s largest maker of printing-ink chemicals, surged 11 percent, while Yara International ASA, the biggest publicly traded nitrogen-fertilizer maker, advanced 14 percent.

SAP advanced 5.2 percent. The largest maker of business- management software reported on Oct. 14 that third-quarter operating profit, based on non-international financial reporting standards, rose 23 percent to 1.13 billion euros. The average analyst estimate in a Bloomberg survey called for earnings of 1.01 billion euros.

ASML Shares Gain

ASML soared 7.2 percent. The company said on Oct. 12 that fourth-quarter orders will increase from the previous three months as customers add capacity and shift to more advanced machines.

Net bookings excluding second-generation EUV, or extreme ultraviolet, lithography systems reached 514 million euros in the third quarter, beating ASML’s earlier forecast of not more than 500 million euros. Net income rose 32 percent from a year earlier to 355 million euros, beating the 323 million-euro average estimate of 16 analysts surveyed by Bloomberg.

Burberry Group Plc jumped 4.4 percent. The U.K.’s largest luxury-goods maker reported fiscal second-quarter sales on Oct. 12 that beat analysts’ estimates, dispelling concern that demand was slowing with plans to add 15 percent to its average retail space.

--Editor: Will Hadfield

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net

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


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