Bloomberg News

European Stocks Rise on Euro Support Pledge

July 30, 2012

European stocks rose to their highest level since April amid optimism the European Central Bank will win support from policy makers for a plan to ease the euro area’s debt crisis.

Air France-KLM Group (AF) surged 19 percent after it posted a narrower second-quarter loss. Evraz (EVR) Plc and Fiat SpA (F) climbed more than 4.5 percent, leading rallies by gauges of commodity producers and automakers. JCDecaux SA (DEC) plunged 6.9 percent as it reported a 13 percent drop in first-half profit.

The benchmark Stoxx Europe 600 Index gained 1.6 percent to 263.94 at the close in London, completing a three-day rally of 5.4 percent, the largest since November. The gauge has risen 13 percent from this year’s low on June 4 as Greece elected a coalition government prepared to abide by the terms of its two European Union-led bailouts.

“We’ve been here before,” George Godber, who helps oversee $22 billion as a fund manager at Charles Stanley’s Matterley division in London, said in an interview on Bloomberg Television. “We’ve actually got to see if they’re going to act now and that’s really what matters. It doesn’t have to be massive steps forward, it just has to be an outlining of a road map.”

ECB President Mario Draghi proposes using the euro area’s temporary rescue fund to buy government bonds on the primary market, while the central bank purchases securities on the secondary market to ensure the transmission of its record-low interest rates, two central bank officials said on July 27 on condition of anonymity.

Merkel-Hollande

European stocks rose for an eighth consecutive week last week as German Chancellor Angela Merkel and French President Francois Hollande joined Draghi in promising to do everything to protect the euro.

Draghi is seeking to build consensus among governments and central bankers for the plan to ease borrowing costs for Spain and Italy before Thursday’s interest-rate setting meeting. The ECB President needs to win over Bundesbank President Jens Weidmann, a critic of ECB bond purchases.

Luxembourg’s Prime Minister Jean-Claude Juncker, who also heads the group of euro-area finance ministers, said the region’s temporary rescue fund and the ECB are preparing act together to reduce borrowing costs, Sueddeutsche Zeitung reported, citing an interview.

A report from the European Commission showed that its index of household sentiment in the euro area declined to an almost three-year low of minus 21.5 in July.

Unemployment Rate

The jobless rate in the 17-nation currency zone probably climbed to 11.2 percent in June from an all-time high of 11.1 percent in May, economists in a separate poll predicted before the statistics office releases its report tomorrow.

In the U.S., the Federal Open Market Committee will announce a policy decision on Aug. 1 after a report last week showed the economy expanded at a slower pace in the second quarter, giving the central bank scope to add to stimulus measures to spur growth.

Air France surged 19 percent to 4.62 euros, its biggest gain in two decades, after posting a narrower second-quarter loss as a restructuring program helped to reduce operating costs. Europe’s second-largest airline by sales reported an operating loss of 66 million euros compared with 145 million euros a year earlier. That beat the average estimate for a 163 million-euro operating loss of three analysts surveyed by Bloomberg. Revenue rose 4.5 percent to 6.5 billion euros.

International Consolidated Airlines Group SA (IAG), the parent company of British Airways Plc, rose 7.2 percent to 162 pence. Deutsche Lufthansa AG (LHA), Europe’s biggest airline by sales, gained 3.2 percent to 10.41 euros.

UniCredit, Intesa

UniCredit SpA (UCG) and Intesa Sanpaolo SpA (ISP) led Italian banks higher, rising 4.6 percent to 2.83 euros and 6.6 percent to 1.06 euros, respectively. Mediobanca SpA (MB) advanced 4.9 percent to 2.81 euros. Credit Agricole SA surged 7 percent to 3.58 euros. A gauge of lenders rallied 3.2 percent for the biggest gain of the 19 industry groups in the Stoxx 600. (SXXP)

National Bank of Greece SA (ETE) soared 10 percent to 1.29 euros. Greece’s largest lender is interested in acquiring the state’s stake in Hellenic Postbank SA, which the government may sell before the end of August, Athens-based Imerisia newspaper reported, without citing anyone.

Evraz, Fiat

Evraz, the steelmaker part-owned by Russian billionaire Roman Abramovich, gained 5.7 percent to 241.6 pence. ArcelorMittal (MT) jumped 5.4 percent to 13.25 euros after Chief Executive Officer Lakshmi Mittal told the Sunday Telegraph in an interview that the world’s biggest steelmaker may close more plants and make further redundancies.

Fiat led carmakers higher, increasing 4.9 percent to 4.19 euros. PSA Peugeot Citroen advanced 4 percent to 6.25 euros. The preferred shares of Volkswagen AG (VOW), Europe’s largest automaker, added 2.6 percent to 137.60 euros.

JCDecaux plunged 6.9 percent to 17 euros, its biggest slump since May. The French billboard company’s first-half net income fell 13 percent to 82.4 million euros as organic growth in the second quarter was “slightly lower than expected.”

National benchmark indexes climbed in western-European market except Iceland. The U.K.’s FTSE 100 Index and France’s CAC 40 Index jumped 1.2 percent, while Germany’s DAX Index gained 1.3 percent.

To contact the reporter on this story: Tom Stoukas in Athens at astoukas@bloomberg.net

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


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