Bloomberg News

European Stocks Climb on U.S. Business Activity; Bayer Advances

December 30, 2011

Dec. 29 (Bloomberg) -- European stocks advanced for the fourth time in five days as business activity in the U.S. expanded more than forecast.

Bayer AG led a gauge of chemical companies higher. Fiat SpA retreated 1.9 percent after Banca IMI SpA cut its recommendation on the shares. Mining companies followed a drop in copper.

The Stoxx Europe 600 Index gained 0.9 percent to 242.46 at the close in London. The gauge has rallied 13 percent from this year’s low on Sept. 22 amid better-than-estimated U.S. economic data and optimism that policy makers will contain the euro-area debt crisis.

“Generally news from the U.S. has been better than expected,” although projections had been muted, said Didier Abbato, a vice president and senior trading adviser at Saxo Bank in Copenhagen. “In absolute terms, U.S. figures are not great. They’re just slightly better than expectations.”

The Institute for Supply Management-Chicago Inc. said its business barometer decreased to 62.5 this month from 62.6 in November. Readings above 50 signal growth. Economists forecast the gauge would fall to 61, according to the median of 49 estimates in a Bloomberg survey.

A U.S. Labor Department report showed that first applications for unemployment benefits increased to 381,000 last week, after falling to the lowest since April 2008 in the previous period. The median forecast of 32 economists surveyed by Bloomberg News had called for 375,000 claims.

The four-week moving average for claims, a less volatile measure than weekly figures, dropped to 375,000 last week, the lowest level since June 2008.

Italian Auction

In Europe, Italy missed its fundraising target at the auction of debt maturing between 2014 and 2022, while its borrowing costs eased.

“The yield on Italian 10-year bonds auctioned coming at just under 7 percent shouldn’t be classified as a success,” said Manish Singh, the London-based head of investment at Crossbridge Capital, which has more than $2 billion under management. “Lingering doubts and the expected slowdown in euro-zone growth in 2012 means investors remain on the edge.”

The Treasury in Rome sold 6 percent bonds due in 2014 to yield 5.62 percent, down from 7.89 percent at the previous sale on Nov. 29 and priced its 5 percent 2022 bond to yield 6.98 percent, compared with 7.56 percent on Nov. 29. The Treasury also sold bonds due in 2021 and a floating-rate security due 2018. Italy’s bond sale followed yesterday’s auction of bills, where yields fell.

Italy Credit Risk

“Although distorted by thin holiday trading, today’s sale is a more accurate gauge of underlying confidence in Italian debt,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, wrote in an e-mail. “Buying 10-year Italian bonds is a leap of faith which investors are prepared to take only at very high interest rates. There are simply too many risks and uncertainties surrounding Italy.”

The nation expects to raise almost 450 billion euros from debt sales next year, enough to cover 202 billion euros of maturing bonds and finance a 23.6 billion-euro deficit, Maria Cannata, director of public debt, said in a Dec. 24 interview with newspaper Il Sole 24 Ore.

The Stoxx 600 has retreated 12 percent in 2011 as the debt crisis spread across the major economies of the euro area.

Low Volumes

Post-Christmas trading has been low, with average daily volume in the Stoxx 600 this week dipping to 33 percent of this year’s average.

National benchmark indexes advanced in 16 of the 18 Western European markets today. Germany’s DAX rose 1.3 percent, while France’s CAC 40 added 1.8 percent. The Swiss Market Index was little changed.

Bayer AG, Germany’s largest drugmaker, increased 2.9 percent to 48.73 euros after filing a supplemental new drug application together with Johnson & Johnson for the Xarelto blood thinner drug to treat Acute Coronary Syndrome.

Yara International ASA, the biggest publicly traded nitrogen-fertilizer maker, rose 1.9 percent to 236.30 kroner and Syngenta AG, the world’s largest producer of crop-protection chemicals, gained 1.1 percent to 274.30 francs. Chemical companies were the third-best performers as a group among the 19 industry groups on the Stoxx 600.

PNE Wind AG, the German wind company, jumped 7.9 percent to 1.89 euros after it sold its shares in a planned North Sea offshore project to a fund managed by Ventizz Capital Partners AG.

Fiat, Raiffeisen Bank

Fiat retreated 0.9 percent to 3.49 euros after Monica Bosio, a Banca IMI analyst, cut the stock to “hold” from “add.”

Mining shares dropped as copper declined for a second day on the London Metal Exchange. Petropavlovsk Plc slid 3.2 percent to 598 pence.

Raiffeisen Bank International AG paced decliners in a gauge of European banks, slumping 1.4 percent to 20.07 euros. Banca Popolare dell’Emilia Romagna Scrl lost 2.6 percent to 5.57 euros.

Lagardere SCA, a French publisher, advanced 2.5 percent to 20.24 euros. Qatar Holding LLC raised its stake in Lagardere to 10.07 percent, according to a filing at the markets regulator, AMF. The AMF said that Qatar Holding has 13.21 million shares of Lagardere, representing 7.87 percent of voting rights.

--Editors: Srinivasan Sivabalan, Andrew Rummer

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