Bloomberg News

European Stocks Rise on China Stimulus Optimism, US Data

June 27, 2012

European stocks rose the most in a week after reports on U.S durable-goods orders and pending home sales beat estimates and speculation mounted that China will introduce additional economic stimulus.

Lloyds Banking Group Plc (LLOY) and Barclays Plc followed bank shares higher. Portugal Telecom SGPS SA (PTC) climbed 3.1 percent after announcing a 200 million-euro ($250 million) share buyback. Glencore International Plc (GLEN) fell after target Xstrata Plc (XTA)’s second-largest shareholder asked for a higher bid.

The Stoxx Europe 600 Index gained 1.4 percent to 245.87 at the close in London, snapping four days of losses. The gauge has climbed 5.1 percent from its 2012 low on June 4 as Greece formed a coalition government after its second election. The volume of shares traded on the measure was 17 percent below the average of the last 30 days, data compiled by Bloomberg show.

“Today’s move all boils down to the news related to the world’s two largest economies” said Keith Bowman, an equity analyst at Hargreaves Lansdown Stockbrokers in London. “Positive economic data from the U.S. and rumors of further stimulus from Chinese authorities is enough to lift the markets out of the doldrums that we have seen in recent days.”

Stocks climbed after a U.S report showed orders for durable goods climbed more than forecast in May, easing concern that U.S. manufacturing is faltering. Separate data showed more Americans than forecast signed contracts to buy previously owned homes last month.

Chinese Stimulus

In China, a commentary in the China Securities Journal said the country may introduce “more proactive” policies to ensure stable growth in the world’s second-largest economy. The policies may include stabilizing foreign trade, expanding infrastructure investment and reducing tax.

The newspaper today reported that a reverse repurchase operation yesterday by the People’s Bank of China has led to speculation that the central bank will cut the reserve requirement ratio for the third time this year.

National benchmark indexes advanced in all 18 western European markets before the European Union summit beginning tomorrow in Brussels. The U.K.’s FTSE 100 climbed 1.3 percent, France’s CAC 40 rose 1.4 percent and Germany’s DAX Index gained 1.3 percent.

Crisis Response

German Chancellor Angela Merkel faces demands from other euro-area nations for more drastic measures to fight the region’s sovereign-debt crisis, as EU leaders prepare for the two-day summit. One such proposal calls for collective debt sales through euro bonds.

“There’s a lot riding on the outcome of the EU summit, and investors sense there’s a more determined spirit to push through tangible measures,” said Mike Lenhoff, chief strategist at Brewin Dolphin Securities Ltd. in London.

A gauge of European bank shares rose 2.5 percent for the largest contribution to the Stoxx 600’s advance. Lloyds gained 3.5 percent to 31.16 pence after the Financial Times reported the lender may sell 630 branches to Co-Operative Group Ltd. as early as today.

Barclays Plc added 1.9 percent to 196.05 pence. The lender has agreed to pay 290 million pounds ($452 million) in penalties to settle U.S. and U.K. investigations into whether it sought to rig the London and euro interbank offered rates. Chief Executive Officer Bob Diamond and other executives will forgo their annual bonuses this year, the bank said.

Portugal Telecom advanced 3.1 percent to 3.42 euros after the country’s biggest telecommunications company announced a 200 million-euro plan to buy back shares for the fiscal years 2012 to 2014. The company said it will pay an annual cash dividend of 32.5 euro cents a share for those years.

K+S, Colruyt

K+S AG (SDF), Europe’s biggest potash producer, jumped 6.9 percent to 34.92 euros after analysts raised their ratings on the stock. Bank of America Corp. upgraded the stock to buy from underperform, while BHF-Bank raised its recommendation to overweight from market weight.

Colruyt NV surged 12 percent to 33.61 euros, the biggest jump since March 2000, as Belgium’s biggest discount food retailer late yesterday reported a surprise increase in full- year profit to 2.18 euros a share. That beat analysts’ estimate of 2.09 euros per share.

Glencore fell 1.5 percent to 298.3 pence, the lowest since it sold its shares to the public in May 2011, after Qatar Holding LLC demanded Glencore’s 6.9 billion-pound bid for Xstrata be increased by 16 percent. Qatar, which owns a 10.36 percent stake in the target company, wants the bid raised to 3.25 Glencore shares for each of Xstrata’s, according to a statement yesterday.

Xstrata gained 1.4 percent to 796.6 pence, after earlier dropping as much as 2.3 percent. The company said it anticipates the merger to be completed by early October.

Salzgitter AG (SZG) tumbled 4.9 percent to 32.50 euros, the lowest since September 2005, after saying its steel unit may not break even this year, citing “notably negative” impact on demand for rolled steel. The company said on May 15 it saw positive 2012 pretax earnings.

To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net

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


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