Bloomberg News

European Stocks Rise, Extending Rally Into Seventh Week

July 16, 2012

European stocks rose for a second day, extending the Stoxx Europe 600 Index’s longest stretch of weekly gains in more than two years, as manufacturing in the New York region expanded more than forecast.

SEB (SEBA) AB, the Swedish bank that’s the second-largest lender in the Baltic countries, soared 8.2 percent after earnings topped analysts’ estimates. G4S Plc (GFS) sank 8.7 percent as the world’s biggest security company said it may incur a 50 million- pound ($78 million) loss after failing to provide enough guards for the Olympic Games.

The Stoxx 600 (SXXP) advanced 0.2 percent to 256.73 at the close of trading. The gauge has climbed for six straight weeks, rallying 9.8 percent from this year’s low on June 4, as the European Central Bank and People’s Bank of China cut their benchmark interest rates and euro-area leaders eased repayment rules for Spanish banks and conditions for possible Italian aid.

“As we go into August-September, there’s a good possibility that we’ll see a slight uptick in macroeconomic data, particularly in northern Europe and probably in the United States,” Robert Parker, senior adviser at Credit Suisse Asset Management, said in a Bloomberg Television interview. “Investors have remained very underweight. The earnings season will run another month and expectations are so negative that the downside risk is low.”

ASML Holding NV will be the first member of the Euro Stoxx 50 Index to report earnings this quarter when Europe’s biggest maker of semiconductor equipment releases results on July 18. Analysts estimate companies in the gauge are forecast to post profit of 240.63 euros a share this year, down from 267.93 euros on Jan. 2, analyst estimates compiled by Bloomberg show.

National Indexes

National benchmark indexes rose in 11 of the 18 western European markets today. Sweden’s OMX Stockholm 30 increased 0.7 percent and Germany’s DAX climbed 0.1, while the U.K.’s FTSE 100 and France’s CAC 40 fell less than 0.1 percent.

Manufacturing in the New York region expanded at a faster pace than anticipated this month, as the the Federal Reserve Bank of New York’s general economic index rose to 7.4 from 2.3 in June. The median forecast of 51 economists surveyed by Bloomberg had predicted an increase to 4. Readings greater than zero signal expansion in the so-called Empire State Index.

The International Monetary Fund cut its 2013 global growth forecast as Europe’s debt crisis prolongs Spain’s recession and slows expansions in emerging markets already facing weaker domestic demand. Growth worldwide will be 3.9 percent next year, less than the 4.1 percent estimate in April, the fund predicted in an update of its World Economic Outlook.

Merkel’s Stance

German Chancellor Angela Merkel said yesterday she hadn’t softened her stance at last month’s summit in Brussels and that a so-called banking union involving a bloc-wide financial overseer will have to include joint oversight on a “new level.”

German lawmakers will interrupt their summer vacations and return to Berlin on July 19 to vote to approve 100 billion euros ($122 billion) in rescue loans to Spain. Euro-area finance ministers will confer on July 20 to complete an agreement on Spain’s bank bailout.

SEB rallied 8.2 percent to 49 kronor, the biggest increase since May 2010. The Stockholm-based bank said second-quarter net income declined to 3.01 billion kronor ($427 million) from 3.36 billion kronor a year earlier, exceeding the average estimate of 13 analysts surveyed by Bloomberg for profit of 2.57 billion kronor.

Delta Lloyd

Delta Lloyd NV (DL) increased 1.6 percent to 11.33 euros, a third day of gains. The Dutch insurer was upgraded to buy from neutral at Citigroup Inc.

G4S slid 8.7 percent to 254.6 pence as the company estimated its loss on the Olympics contract will be 35 million pounds to 50 million pounds. The U.K. government had to assign 3,500 extra soldiers to Olympic venues last week as G4S said it couldn’t train enough guards.

Sage Group Plc (SGE) declined 3.2 percent to 276 pence after the U.K.’s biggest software maker said conditions in Europe have toughened.

“Overall performance in Europe has been flat and the anticipated improvement in growth over the first half has not yet materialised,” the company said in a statement.

PSA Peugeot Citroen (UG) sank 6.8 percent to 6.04 euros, the lowest since at least 1989. The French automaker planning to cut thousands of jobs and close a factory has a 51 percent chance of default within five years, according to credit-default swap data compiled by Bloomberg.

Cove Energy Plc (COV) sank 14 percent to 238 pence after Royal Dutch Shell Plc declined to raise its takeover offer, leaving Thailand’s PTT Exploration & Production Pcl as the highest bidder for the East Africa-focused energy explorer.

Etablissements Maurel & Prom SA, whose chief executive officer said last month that a takeover by Shell would make sense, surged 6 percent to 12.04 euros.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net

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


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