Bloomberg News

European Stocks Rebound; Banks and Carmakers Lead Gains

April 11, 2012

European stocks gained, rebounding from a two-month low, as banks and automakers advanced and Spain’s prime minister said the country wouldn’t need a bailout.

Deutsche Bank AG was among stocks leading banks higher. Volkswagen AG (VOW) rose 3 percent. Aluminum producer Norsk Hydro ASA (NHY) rose 2.2 percent. Nokia Oyj (NOK1V) tumbled 14 percent after it lowered the first-quarter outlook for its handset division.

The Stoxx Europe 600 Index gained 0.7 percent to 254.43 at the close in London. European stocks tumbled 2.5 percent yesterday to their lowest level since Jan. 30, amid mounting concern about the region’s debt crisis and as a U.S. report showed employers in the world’s largest economy added fewer jobs in March than forecast.

“Fundamentally, the equity market offers extreme value and I am very happy to be buying on the dips,” said George Godber, who helps oversee $22 billion as a fund manager at Charles Stanley’s Matterley division in London. His Matterley Undervalued Assets Fund rose 12 percent in 2012. “Equities are the only place to be.”

Prime Minister Mariano Rajoy said Spain faces a “huge” task generating jobs and growth as it looks to rein in its budget deficit. Addressing lawmakers of his People’s Party in Madrid today, he also said he wants to make it “as clear as day” that Spain won’t need a bailout.

Spain’s 10-year borrowing costs have jumped more than 1 percentage point since March 2, when Rajoy announced that the country will miss its 2012 budget-deficit goal approved by the European Union. Euro-region finance ministers on March 12 settled on narrowing the shortfall to 5.3 percent of gross domestic product from 8.5 percent last year, even as the nation battles its second recession since 2009.

Coeure Comments

European Central Bank Executive Board member Benoit Coeure triggered speculation that the bank will revive its bond purchase program to lower Spain’s borrowing costs.

Spanish “market conditions are not justified,” Coeure, who heads the ECB’s market operations division, said at an event in Paris today. “Will the ECB intervene? We have an instrument, the securities markets program, which hasn’t been used recently but it still exists.”

The euro rose and Spanish bond yields declined as Coeure’s comments reassured investors that the ECB will act again if needed to stem the crisis.

Bank Optimism

HSBC Holdings Plc, Europe’s biggest bank, said there is a “glimmer” of light for European bank earnings as it upgraded the industry to overweight for the first time in four years.

European bank earnings may have “bottomed” as long as the region’s economy doesn’t contract by more than 2 percent this year, HSBC analyst Peter Sullivan wrote to clients today.

Deutsche Bank, Germany’s largest bank, added 2.3 percent to 34.48 euros. Barclays Plc gained 2.8 percent to 212.1 pence. Italian banks gained, with UniCredit, the country’s biggest bank, adding 5.5 percent to 3.21 euros after falling 8.1 percent yesterday. Intesa Sanpaolo SpA also rose 5.5 percent to 1.20 euros. Banca Popolare di Milano Scarl gained 5.9 percent to 34.8 euro cents.

Banco Santander SA, Spain’s largest bank, added 2 percent to 5.30 euros, Banco Bilbao Vizcaya Argentaria SA rose 3.8 percent to 5.60 euros. BBVA was raised to buy from hold at Deutsche Bank.

Beige Book

In the U.S., the Federal Reserve will release its Beige Book regional business survey today. The central bank said in its last report on the local economic climate surveyed by the nine branches of the Fed that the U.S. economy expanded at a “modest to moderate pace” in January and early February as factories increased production.

Preferred shares of Volkswagen added 3 percent to 128.80 euros, after four days of losses. Europe’s largest carmaker said first-quarter auto sales rose 10.5 percent to 1.36 million units. Daimler AG (DAI) added 1.2 percent to 41.31 euros. Bayerische Motoren Werke AG (BMW), the world’s largest maker of luxury vehicles, gained 2.5 percent to 66.71 euros.

Norsk Hydro, a European aluminum producer, advanced 2.2 percent to 29.95 kroner after Alcoa Inc. (AA:US), the largest U.S. aluminum producer, reported an unexpected first-quarter profit after orders rose and it closed higher-cost smelting capacity.

G4S Plc (GFS), the world’s largest security company, gained 2.6 percent to 280.1 pence after the stock was upgraded to overweight from equal weight at Morgan Stanley.

Givaudan Rises

Givaudan, the Swiss maker of flavors and fragrances, rose 3.7 percent to 894.50 francs. The company reported improved first-quarter sales as it continued to pass on the higher cost of raw materials including vanilla and citrus oils with increased pricing.

Sales gained 4.7 percent to 1.06 billion Swiss francs ($1.16 billion), the Geneva-based company said in a statement today. Revenue growth was in line with Givaudan’s target of expanding by between 4.5 percent and 5.5 percent each year.

Nyrstar NV, the world’s largest producer of refined zinc, gained 4 percent to 6.10 euros. Japan’s zinc demand may increase 7.2 percent this year to a four-year high as the economy recovers from an earthquake and tsunami and the weaker yen helps boost exporters, Mitsui Mining & Smelting Co., the country’s largest smelter, said.

ArcelorMittal (MT), the world’s biggest steelmaker, added 2.6 percent to 13.24 euros. Eramet SA, operator of the world’s biggest ferronickel plant, gained 3.1 percent to 100 euros.

Nokia Drops

Nokia tumbled 14 percent to 3.27 euros, its lowest level since 1997, after the company cut its profit forecast for its handset division. The first-quarter operating margin for the devices and services business was probably minus 3 percent based on the non-IFRS accounting standard, Espoo, Finland-based Nokia said in a statement today. The company had predicted “around breakeven” with a range of 2 percentage points in either direction. Second-quarter figures will be “similar to or below” those for the current quarter, it said.

Getinge, a Swedish maker of hospital equipment, fell 5.3 percent to 175.70 kronor after it said first-quarter profit missed analyst estimates.

Profit before tax was between 560 million kronor ($82 million) and 570 million kronor, the Getinge-based company said in a statement today. Profit a year earlier was 568 million kronor. Analysts predicted 672 million kronor, the average of six estimates compiled by Bloomberg.

Michael Page International Plc (MPI) fell 3.6 percent to 437.8 pence. The recruitment services company reported first-quarter profit of 136 million pounds and said markets continue to be weak and visibility remains limited.

British Sky Broadcasting Group Plc (BSY) fell 0.8 percent to 649 pence. The pay-TV broadcaster in which Rupert Murdoch’s News Corp. owns a 39 percent stake, was downgraded to underperform from neutral at Bank of America Corp.

To contact the reporter on this story: Tom Stoukas in Athens at astoukas@bloomberg.net

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


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Companies Mentioned

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