Bloomberg News

European Stocks Rise as U.S. Data Offsets Debt-Crisis Concern

December 27, 2011

Dec. 23 (Bloomberg) -- European stocks rose, capping the first weekly rally since Dec. 2, as U.S. durable-goods orders and new home sales increased, reinforcing optimism that the recovery in the world’s largest economy is gathering strength.

Wavin NV jumped 22 percent after Mexichem SAB raised its bid for the Dutch manufacturer by 11 percent to 10 euros a share. BP Plc led oil and gas producers higher as crude headed for its biggest weekly gain in two months.

The Stoxx Europe 600 Index rose 0.9 percent to 241.83 at the close in London. The gauge has advanced 3.5 percent this week and rebounded 13 percent from this year’s low on Sept. 22 amid optimism that U.S. economic growth is holding firm and euro-area leaders are moving to stem the region’s debt crisis.

“The U.S. is beginning to show signs of life,” said John Haynes, the head of research at Investec Wealth & Investments in London. “There is some positive momentum in the U.S. economy.” He spoke in a Bloomberg Television interview with Mark Barton.

Orders for U.S. durable goods rose in November by the most in four months as an increase in demand for aircraft outweighed declines in spending on computers and equipment.

Bookings for equipment meant to last at least three years rose 3.8 percent after no change in the prior month that was previously reported as a decline, data from the Commerce Department showed today in Washington.

U.S. Property Market

A separate report showed sales of new U.S. homes rose to a seven-month high in November. Purchases of single-family properties increased 1.6 percent to a 315,000 annual pace, pushing the number of new homes on the market to a record low.

Data yesterday showed new unemployment claims unexpectedly fell by 4,000 to 364,000 in the week ended Dec. 17, the lowest level since April 2008.

Despite this week’s rally, the Stoxx 600 has still tumbled 12 percent this year as the crisis spread to Italy and Spain. Banks and commodity companies have posted the largest declines among 19 industry groups on the gauge, both slumping more than 30 percent.

The volume of shares changing hands across Europe has fallen this week as the Christmas holiday break approaches. Trading on the Stoxx 600 this week was 22 percent below the average for 2011, according to data compiled by Bloomberg.

National benchmark indexes climbed in all 18 western- European stock markets. The U.K.’s FTSE 100 Index rose 1 percent, Germany’s DAX gained 0.5 percent and France’s CAC 40 gained 1 percent.

Quantitative Easing

European Central Bank Executive Board member Lorenzo Bini Smaghi said that policy makers shouldn’t shirk from using quantitative easing if deflation becomes a danger to the euro region. Unlike the U.S. Federal Reserve and the Bank of England, the ECB has offset liquidity created by purchases of government bonds so that such operations don’t amount to quantitative easing that stokes inflation.

“I do not understand the quasi-religious discussions about quantitative easing,” Bini Smaghi, who will leave his post at the end of the month, said in an interview published yesterday by the Financial Times. The ECB confirmed the comments. “It is appropriate if economic conditions justify it, in particular in countries facing a liquidity trap that may lead to deflation.”

Wavin soared 22 percent to 9.58 euros as it granted access to Mexichem to carry out due diligence, after the Latin American chemical producer increased its bid for Wavin to 10 euros from 9 euros.

BP rose 2.1 percent to 459.70 pence, while Total SA added 2.1 percent to 38.64 euros. Crude oil climbed for a fifth day in New York, the longest stretch of gains since Nov. 8.

EDP-Energias de Portugal dropped 0.3 percent to 2.32 euros, erasing an earlier gain of 3.7 percent, after Fitch Ratings reaffirmed the company’s long-term credit rating at BBB+. EDP had advanced after Portugal said China Three Gorges Corp. will pick up a stake in the company.

--Editors: Srinivasan Sivabalan, Andrew Rummer

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

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


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