Bloomberg News

European Stocks Rise for Seventh Week on Company Earnings

July 20, 2012

European stocks climbed for a seventh straight week, the longest winning streak in more than six years, as better-than-expected earnings offset concern that the euro area crisis is deepening.

ASML Holding NV (ASML), Europe’s biggest semiconductor equipment maker, Akzo Nobel NV, the world’s largest paintmaker, and SEB AB (SEBA) all advanced this week after posting results that beat analyst estimates.

The Stoxx Europe 600 Index climbed 0.8 percent to 258.17 this week, for the longest stretch of gains since January 2006 even after falling 1.4 percent on Friday. The gauge has rebounded 10 percent from this year’s low on June 4 as central banks from Europe to China eased monetary policy to help spur economic growth.

“Investors have been given the rare opportunity to focus on companies as the earnings reporting season continued to filter through,” said Simon Reynolds, a fund manager at Octopus Investments in London. “Upbeat U.S. earnings have helped lift equity markets.”

Of the 46 companies on the Stoxx 600 that have reported earnings this quarter, 48 percent beat forecasts, according to data compiled by Bloomberg. On the Standard & Poor’s 500 Index, 73 percent of the 118 companies that have reported quarterly earnings have topped analyst estimates, the data show.

National benchmark indexes rose in 11 of the 18 western European (SXXP) markets this week. Germany’s DAX rallied 1.1 percent, France’s CAC 40 advanced 0.4 percent and Switzerland’s SMI gained 1.7 percent. The U.K.’s FTSE 100 lost 0.3 percent, while Spain’s IBEX 35 fell 6.3 percent and Italy’s FTSE MIB retreated 4.7 percent.

Friday Decline

European stocks dropped on Friday, paring their weekly advance, as the yield premium for Spanish benchmark bonds over German bunds surged to a record. Spanish bonds declined, pushing the extra yield investors demand to hold the nation’s 10-year securities instead of similar-maturity German bunds to the most on record.

Spain’s recession will extend into next year as the region of Valencia prepared to seek a rescue from the central government and European finance ministers approved the bailout of Spanish banks, Budget Minister Cristobal Montoro said after the Cabinet met on Friday in Madrid. Gross domestic product will fall 0.5 percent in 2013 instead of rising 0.2 percent as the government predicted April 27, Montoro said.

ASML surged 9.7 percent after the chipmaker said second- quarter net bookings climbed 9.8 percent and that technological advances will boost business in the longer term.

Akzo Nobel (AKZA) jumped 10 percent. The company reported second- quarter earnings ahead of analyst forecasts as Chief Executive Officer Ton Buechner drives ahead with a revamp to improve profitability.

SEB, Nordea

SEB, the second-largest lender in the Baltic countries, and Nordea Bank AB, the Nordic region’s biggest bank, also reported earnings that topped analysts’ estimates. The shares gained 8 percent and 2.1 percent respectively.

Remy Cointreau SA (RCO) increased 6.1 percent in Paris as France’s second-biggest distiller reported an increase in first- quarter sales that also topped projections.

CSR Plc (CSR) surged 37 percent after Samsung Electronics Co. agreed to buy its wireless technology unit for $310 million.

Homeserve Plc (HSV) jumped 17 percent after the emergency-repair provider said it was on track to reach its full year customer targets for the U.K. Shares surged on Wednesday after the Daily Telegraph reported the company had been approached by private-equity buyers. Homeserve said in a statement that it isn’t in any discussions which could lead to a possible offer.

Credit Suisse

Credit Suisse Group AG (CSGN), Switzerland’s second-biggest bank, fell 1.5 percent as concern about the euro-area debt crisis saw the yield premium for Spanish benchmark bonds over German bunds surging to a record.

The lender climbed earlier in the week after posting an increase in second-quarter net income and announcing measures to cut costs and boost capital by 8.7 billion Swiss francs ($8.9 billion).

HSBC Holdings Plc (HSBA) dropped 4.8 percent as the bank’s head of group compliance, David Bagley, told a U.S. Senate hearing he would step down as lawmakers probe whether the bank broke anti- money laundering rules.

Executives at Europe’s biggest lender were questioned by the Senate’s Permanent Subcommittee on Investigations over claims that bank affiliates gave terrorists, drug cartels and criminals a portal into the U.S. financial system by failing to guard against money laundering.

HSBC is also among banks that are being investigated for involvement in allegedly manipulating Libor rates.

Nokia Slides

Nokia (NOK1V) slid 5.8 percent as the unprofitable mobile-phone maker’s debt, already at junk status at the three biggest rating companies, was lowered further by two steps at Fitch Ratings after its second-quarter loss widened.

The long-term rating was cut to BB- from BB+ with a negative outlook, Fitch said in a statement on Friday. Nokia on Thursday reported an operating loss at its handset division equivalent to 9.1 percent of revenue adjusted for some items and forecast similar losses for the current period.

Puma SE dropped 2.1 percent after Europe’s second-largest sporting-goods maker cut its forecasts for sales and profit growth in 2012.

Alcatel-Lucent SA (ALU) plunged 23 percent to its lowest level since March 2009 after posting a second-quarter loss on waning demand. France’s largest telecommunications equipment supplier also said it expects to miss a 2012 profitability target.

In the U.K., G4S Plc (GFS) sank 13 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.

Cove Energy Plc (COV) lost 13 percent after Royal Dutch Shell Plc pulled out of the race for the East Africa-focused explorer, leaving Thailand’s PTT Exploration & Production Pcl as the sole bidder.

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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