European stocks posted their biggest weekly advance in four months as China cut interest rates and the European Central Bank said it’s ready to add more stimulus if the economy worsens.
Banco Espirito Santo (BES) SA and CaixaBank (CABK) led gains on a gauge of lenders as Spain moved closer toward seeking emergency aid to rescue its banking system. Assicurazioni Generali SpA (G), Italy’s largest insurer, jumped 8.4 percent as it named a new chief executive officer. MAN SE, climbed 5.6 percent after Volkswagen AG increased its stake in the truckmaker.
The Stoxx Europe 600 Index (SXXP) advanced 2.9 percent to 241.93 this past week, the biggest jump since Feb. 3. The benchmark measure has still tumbled 11 percent from this year’s high on March 16 on concern Greece may be forced to leave the euro currency union. The selloff has left the gauge’s valuation at 10.1 times estimated earnings of its companies, according to data compiled by Bloomberg.
“The bottom line for this week’s rebound was a technical recovery, backed by high hopes of stimulus in the U.S. and in Europe,” said Trung-Tin Nguyen, a Zurich-based hedge-fund manager at TTN AG. “The recovery could still continue for a little while, but there’s still a lot of noise disturbing the markets, with the Greek elections coming up and Spain’s problems still looming.”
National benchmark indexes climbed in 14 of the 18 western European markets this week. The U.K.’s FTSE 100 gained 3.3 percent. France’s CAC 40 rose 3.4 percent and Germany’s DAX added 1.3 percent. Spain’s IBEX 35 (IBEX) rallied 8 percent.
Following Australia’s decision to reduce its benchmark interest rate, China on June 7 cut both the deposit and lending rate by 25 basis points.
European Central Bank President Mario Draghi, who kept the benchmark interest rate at a record low of 1 percent, left the door open for further stimulus measures, while highlighting the limitations of the ECB’s tools in countering the region’s financial turmoil.
A report on June 6 showed the euro-area economy stalled in the first quarter as companies cut spending to weather the debt crisis, offsetting a gain in exports. Gross domestic product in the region was unchanged from the fourth quarter, when it declined 0.3 percent.
In Germany, Europe’s largest economy, a report showed exports declined 1.7 percent in April, for the first time this year. That was more than the 0.7 percent drop economists forecast in a Bloomberg News survey.
Finance ministers and central bank governors from the Group of Seven economies agreed to coordinate their response to the euro area’s sovereign-debt crisis on a conference call on June 5. G-7 officials said they will work together to help Greece and Spain place their public finances on a sustainable footing, according to Japan’s Finance Minister, Jun Azumi.
Federal Reserve Chairman Ben S. Bernanke told a Congressional committee that policy makers will discuss later this month whether to do more to spur growth, though he said the steps they could take may have “diminishing returns.”
The Stoxx 600 Banks Index rallied 7 percent. Banco Santander SA (SAN) climbed 12 percent and Banco Bilbao Vizcaya Argentaria SA (BBVA) rose 11 percent. CaixaBank rallied 15 percent.
Banco Espirito Santo, Portugal’s biggest publicly traded bank, surged 16 percent as the government decided to give more than 6.6 billion euros to Banco Comercial Portugues SA, Banco BPI SA (BPI) and Caixa Geral de Depositos SA to help them meet capital requirements. Espirito Santo has completed its capital increase without seeking government aid.
Assicurazioni Generali climbed 8.4 percent as Mario Greco prepared to take over as chief executive officer. Greco will take charge after he resigns from Zurich Insurance Group AG. Giovanni Perissinotto, who has led Generali since 2001, was voted out by its board on June 2.
MAN SE (MAN) gained 5.6 percent. Volkswagen AG raised its holding in the company, crossing a threshold necessary for gaining greater control of the German truckmaker and taking a step further in challenging Daimler AG in heavy-duty vehicles.
Volkswagen increased its voting rights to 75.03 percent from 73.76 percent to forge an alliance between MAN, Scania AB and its own commercial vehicles unit.
Premier Oil Plc (PMO) increased 7.4 percent as the British explorer said it encountered oil in its 50 percent-owned Carnaby 28/09-5A well in the North Sea. Cairn Energy Plc (CNE), which owns 15 percent of the Carnaby well, rose 6.8 percent.
Vestas Wind Systems A/S (VWS), the world’s largest wind-turbine maker, dropped 5 percent. BlackRock Inc. cut its holding in the company to 4.02 percent.
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