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European Stocks Gain as Spain’s Borrowing Costs Drop

August 21, 2012

European Stocks Gain as Spain’s Borrowing Costs Drop

The interior of the Madrid Stock Exchange is seen in Madrid. Photographer: Angel Navarrete/Bloomberg

European (SXXP) stocks advanced as Spain’s borrowing costs fell at a debt sale, while investors awaited bilateral meetings between the leaders of euro-area countries to gauge their progress in tackling the fiscal crisis.

Mining stocks posted the second-biggest gain of the 19 industry groups in the Stoxx Europe 600 Index as Rio Tinto Group and BHP Billiton Ltd. (BHP) each added at least 1.5 percent. Straumann Holding AG (STMN) slumped to its lowest price in nine years after earnings missed analysts’ projections.

The Stoxx 600 climbed 0.4 percent to 272.58 at the close of trading. The gauge rose to its highest level since July 2011 last week, its 11th consecutive week of gains, as optimism mounted that the currency zone’s central bankers and politicians will act to protect lenders and as U.S. consumer sentiment and leading economic indicators exceeded forecasts.

“We’ve got enough noises coming out of governments and central banks to suggest they are going to do something; they just need to figure out how to do it,” Karen Olney, head of thematic equity strategy at UBS AG said in a Bloomberg Television interview. “Asset allocators are saying it’s time to maybe reduce our underweight in European equities.”

The volume of shares changing hands on the Stoxx 600 was 15 percent lower than the average of the last 30 days, data compiled by Bloomberg show.

Bilateral Meetings

Spain’s borrowing costs fell at an auction of 12- and 18- month securities today. The yield for bills maturing next August slipped to 3.07 percent from 3.92 percent at a debt sale on July 17. The yield for the notes maturing in February 2014 slid to 3.34 percent from 4.24 percent.

Luxembourg’s Prime Minister, Jean-Claude Juncker, head of the group of euro-area finance ministers, visits Athens tomorrow to listen to a request by Greek Prime Minister Antonis Samaras for a two-year extension to the country’s fiscal-adjustment program. French President Francois Hollande and German Chancellor Angela Merkel meet in Berlin on Aug. 23.

National benchmark indexes gained in every western-European market except Denmark. The U.K.’s FTSE 100 Index added 0.6 percent. France’s CAC 40 Index climbed 0.9 percent and Germany’s DAX Index advanced 0.8 percent. Greece’s ASE Index posted the biggest gain, rising 2.7 percent.

House Sales

In the U.S., house sales and durable-goods orders probably increased in July, economists said before reports this week.

A report tomorrow may show that sales of existing properties rose to a 4.51 million annual pace from a 4.37 million pace in June, economists predicted. A release on Aug. 23 will show new house purchases climbed to a 365,000 annual rate in July from a 350,000 pace in June, according to the median forecast of economists surveyed by Bloomberg.

On Aug. 24, a Commerce Department report will show that durable-goods orders rose 2.5 percent, the most this year, economists projected.

China’s central bank today injected 150 billion yuan ($23.6 billion) using seven-day contracts and another 70 billion yuan using 14-day agreements in reverse-repurchase operations intended to ease a cash crunch, a trader at a primary dealer required to bid at the auctions said.

That was the biggest one-day injection since the current round of reverse repos started in late June. The previous high was 143 billion yuan on July 3.

Mining Companies

Rio Tinto, the world’s third-largest mining company, gained 2.1 percent to 3,062.5 pence and BHP Billiton added 1.5 percent to 1,980 pence after copper prices climbed in London. A gauge of mining stocks listed on the Stoxx 600 rose 1.7 percent.

Julius Baer Group AG climbed 3.1 percent to 32.36 Swiss francs after the company said late yesterday it will reduce its rights offer to 500 million francs ($519 million) from 750 million francs.

Barclays Plc (BARC) gained 3.2 percent to 197.1 pence after saying it has started talks with South Africa’s Absa Group Ltd. to merge their African units. The combination would affect the banks’ assets in Kenya, Botswana, Zambia, Tanzania and Ghana, according to a statement. Barclays bought 54 percent of Absa in 2005 for $4.5 billion.

Straumann plunged 13 percent to 108.80 francs, its lowest price since April 2003. The world’s biggest maker of dental implants reported first-half Ebit of 53.3 million francs, missing the average analyst estimate of 59.3 million francs. The company said it does not expect demand to recover in Europe in the short term.

Nobel Biocare Holding AG (NOBN), the world’s second-largest maker of dental implants, slipped 1.1 percent to 9.17 francs.

Telekom Austria AG (TKA) slid 3.9 percent to 6.45 euros, its lowest price since May 2001. Banco Espirito Santo SA cut its price estimate on the shares, the eighth brokerage to downgrade its forecast since the Vienna-based phone company lowered its full-year profit and revenue outlook on Aug. 16.

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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