Bloomberg News

European Stocks Climb on Stimulus Speculation

August 23, 2012

European stocks climbed, rebounding from yesterday’s selloff, amid speculation central banks in the U.S. and China will ease monetary policy further to support economic growth. U.S. index futures and Asian stocks also rose.

International Consolidated Airlines Group SA (IAG) and Air France-KLM (AF) gained 1.4 percent and 1.6 percent, respectively, after rival Qantas Airways Ltd. posted its first annual loss in at least 17 years. Anglo American Plc (AAL) increased 1.5 percent as the mining company was said to be nearing an agreement to end a dispute over a copper mine in Chile. Royal Ahold NV declined 2.8 percent after the retailer reported earnings that missed some analysts’ estimates.

The Stoxx Europe 600 Index (SXXP) advanced 0.6 percent to 270.74 at 8:15 a.m. in London, paring yesterday’s 1.2 percent drop. The benchmark measure has rallied 16 percent from this year’s low on June 4. Standard & Poor’s 500 Index futures expiring in September climbed 0.3 percent today, while the MSCI Asia Pacific Index (MXAP) jumped 1.1 percent.

“Major central banks are likely to keep policy loose or loosen further in coming months,” wrote Willem Buiter, chief economist at Citigroup Inc., in London in a report to clients dated yesterday. Policymakers will be “ready to act promptly if growth disappoints or market strains flare up again.”

Minutes from the Federal Open Market Committee’s July 31- Aug. 1 meeting showed many members judged that additional stimulus “would likely be warranted fairly soon” unless the pace of the U.S. economic recovery picks up.

In China, a preliminary report today indicated that manufacturing will contract at a faster pace in August, signaling the country’s economy needs more monetary and fiscal stimulus to secure a second-half rebound in growth.

China’s Manufacturing

A preliminary reading of 47.8 for a purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics compared with July’s final 49.3 figure. If confirmed, it would be the lowest level since November and the 10th month that the reading has stayed below 50, the longest run in the index’s eight-year history.

European stocks tumbled by the most in almost three weeks yesterday after Japan reported a wider-than-expected trade deficit as shipments to the European Union slumped in July.

German Chancellor Angela Merkel will today host French President Francois Hollande as the leaders of Europe’s two biggest economies seek common ground on Greece and the wider euro-area debt crisis.

Greece’s Prime Minister, Antonis Samaras, will follow Hollande to Berlin tomorrow and travel on to Paris on Aug. 25. He used an interview published yesterday in Germany’s best- selling Bild newspaper to call for more time to carry out policy changes to address his country’s debt woes.

European Airlines

IAG, the owner of British Airways, climbed 1.4 percent to 149 pence and Air France advanced 1.6 percent to 4.26 euros after rival Qantas reported a loss of A$245 million ($258 million) for the year ended June 30 amid rising competition on international routes.

The loss also prompted Australia’s largest airline to cancel an order for 35 Boeing Co. 787-9s worth $8.5 billion at list prices.

Anglo American added 1.5 percent to 1,939.5 pence. The mining company will announce as soon as today an agreement to end a 10-month dispute with Chile’s Codelco over the world’s fifth-largest copper mine, according to a person with knowledge of the negotiations.

As part of the settlement, Codelco will probably buy a 24.5 percent stake in Anglo’s Sur unit at a below-market price and may gain land to expand its Andina mine, which is adjacent to Anglo’s Los Bronces mine in central Chile, said the person, who asked not to be identified because the discussions are private.

Ahold, the Dutch owner of Stop & Shop grocery stores, dropped 2.8 percent to 10.14 euros. The company today reported second quarter earnings before interest and taxes of 326 million euros, 4.7 percent below Oddo & Cie’s estimate of 342 million euros. The underlying operating margin in the Netherlands fell to 5.4 percent, falling short of the 6.1 percent that analysts had predicted.

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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