Bloomberg News

Europe Stocks Post First Weekly Gain in a Month on Values

May 25, 2012

European stocks posted their first weekly advance in a month as China pledged to bolster growth and a three-week selloff left the Stoxx Europe 600 Index at its cheapest level since January.

A gauge of lenders rallied the most in two months even as Moody’s Investors Service downgraded some of the region’s banks. Construction companies rebounded on speculation the Chinese government will accelerate its infrastructure projects. Vodafone Group Plc climbed as revenue topped estimates.

The Stoxx 600 (SXXP) rose 1.5 percent to 242.49 this week as 18 of 19 industry groups gained. The gauge has still lost 11 percent since this year’s high on March 16 amid mounting concern Greece will fail to implement budget measures required to stay in the euro. The selloff has left the gauge’s valuation at 10.1 times estimated earnings, according to data compiled by Bloomberg.

“It is still debatable whether or not one buys into equity markets at these levels because uncertainties are profound, but value is starting to be seen,” said Andrew Milligan, head of global strategy at Standard Life Investments Ltd in Edinburgh. “All we can say is a lot of bad news has been priced in.”

Chinese Premier Wen Jiabao this week said the nation should put “stabilizing growth in a more important position.” In comments posted on the government’s website, he called for an increase in lending to support construction, spurring expectations that the government will step up stimulus measures.

Greek Risk

The Stoxx 600 still sank 2.1 percent on May 23, as former Greek Prime Minister Lucas Papademos told the Wall Street Journal that while it is unlikely the nation will leave the euro, it’s still a risk.

European Union leaders met in Brussels on May 23 to discuss the region’s debt crisis. Italian Prime Minister Mario Monti told Italian television station La7 that the majority of EU leaders at the meeting backed joint euro-area bonds and that Italy can help persuade Germany to support Europe’s “common good.”

National benchmark indexes advanced in all the 18 western European markets this week, except Greece, Spain and Portugal. The U.K.’s FTSE 100 (UKX) rose 1.6 percent, France’s CAC 40 gained 1.3 percent and Germany’s DAX rose 1.1 percent.

A gauge of banks rallied 2.2 percent, the biggest advance since March. KBC Groep NV, Belgium’s largest bank and insurer, jumped 10 percent, while Sweden’s Nordea Bank AB gained 5.7 percent and UBS AG increased 4.3 percent.

Banco Popolare SC surged 8.9 percent as Bank of America Corp. and Exane BNP Paribas upgraded the shares after Italy’s fourth-biggest bank said regulatory approval to use internal risk models boosted its Tier 1 capital.

Moody’s Downgrades

Moody’s this week downgraded Dexia Bank Belgium, Sweden’s Nordea and Svenska Handelsbanken AB, and Norway’s DNB Bank ASA. The rating company downgraded 16 Spanish banks last week.

Lafarge SA, the world’s largest cement maker, rose 4.4 percent, Eiffage SA increased 8.7 percent and CRH Plc, the world’s second-biggest building-materials maker, rose 3 percent.

A gauge of construction-related companies climbed 2.3 percent, paring some of last week’s 6.5 percent selloff. The shares climbed as the China Securities Journal reported the country is planning to speed up the approval of infrastructure projects.

Vodafone Group Plc gained 5.4 percent after Europe’s largest mobile phone company posted quarterly service revenue that exceeded analysts’ estimates.

Cable & Wireless Communications Plc surged 8.6 percent after reporting earnings that beat estimates.

Bankia SA (BKIA) sank 11 percent before regulators suspended trading on May 25. The company’s board was due to meet to approve a recapitalization plan and vote on restated accounts.

London Stock Exchange Group Plc fell 2.8 percent after UniCredit SpA (UCG) and Intesa Sanpaolo SpA (ISP), Italy’s biggest banks, sold an 11.5 percent stake in Europe’s oldest independent exchange.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

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


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