Bloomberg News

Europe Stocks Rise as Bernanke Doesn’t Rule Out Stimulus

August 31, 2012

European stocks rose as Federal Reserve Chairman Ben S. Bernanke said he would not rule out further bond purchases to boost growth and reduce unemployment, which he called a “grave concern.”

Hermes International SCA (RMS) gained 2.3 percent after the maker of Birkin and Kelly bags raised this year’s sales-growth target as first-half earnings beat estimates. Bankia SA climbed 6.3 percent as Spain was said to be considering recapitalizing the country’s largest nationalized lender with its own money.

The Stoxx Europe 600 Index added 0.5 percent to 266.23 at the close of trade. The gauge declined 0.7 percent this week amid signs that global economic growth is slowing and as the Spanish region of Catalonia asked for a bailout from the central government. Shares still gained 1.9 percent this month.

“As expected, Mr Bernanke confirmed that the Fed stands ready to provide more policy stimulus but is not about to pull the trigger just yet,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London. “The markets are taking Mr Bernanke’s comments in their stride, with hopes for more immediate central bank intervention now pinned on the ECB.”

“The costs of non-traditional policies, when considered carefully, appear manageable, implying that we should not rule out the further use of such policies if economic conditions warrant,” Bernanke said today in a speech to central bankers and economists at an annual forum in Jackson Hole, Wyoming.

Stimulus Meeting

Bernanke’s speech comes two weeks before he leads a meeting of the Federal Open Market Committee to decide whether an expansion of the Fed’s record stimulus is needed to spur growth. Two rounds of large-scale asset purchases totaling $2.3 trillion have so far failed to reduce the jobless rate below 8 percent more than three years into the recovery.

Separately, a report showed business activity in the U.S. expanded at a slower pace in August. The Institute for Supply Management-Chicago Inc. said today its business barometer fell to 53.0 this month from 53.7 in July. Figures greater than 50 signal expansion. Economists forecast the gauge would drop to 53.2, according to the median estimate in a Bloomberg survey.

Euro-area unemployment reached the highest on record in July, the European Union’s statistics office in Luxembourg said today. The jobless rate in the economy of the 17 nations using the euro was 11.3 percent, the same as in June after that month’s figure was revised higher. That’s the highest since the data series started in 1995.

National benchmark indexes advanced in every western- European market today, except for the U.K. and Iceland. The U.K.’s FTSE 100 Index fell 0.1 percent, while France’s CAC 40 Index rose 1 percent. Germany’s DAX Index climbed 1.1 percent.

Hermes Gains

Hermes increased 2.3 percent to 228.95 euros as it said annual sales growth excluding currency shifts “could be around 12 percent.” The company last month said it targeted annual revenue growth of 10 percent.

Operating income climbed to 510.9 million euros ($640 million) from 418.1 million euros a year ago, beating the average 502 million-euro analyst estimate. Net income rose 15 percent to 335.1 million euros, beating the 320.7 million euro average of three analyst estimates compiled by Bloomberg.

Bankia (BKIA) climbed 6.3 percent to 1.43 euros. Spain is considering recapitalizing the country’s largest nationalized lender with its own money instead of using the emergency portion of a 100 billion-euro bailout from the European Union, according to two people with direct knowledge of the matter.

This would allow Spain to put off forcing Bankia group’s junior debt holders to bear part of the rescue cost, said the people, who asked not to be identified because the negotiations are private. European officials backed burden sharing in the talks because it would limit the need for public money, the people said.

Lenders Advance

A gauge of European lenders was the best performer of the 19 industry groups on the Stoxx 600, with Banca Monte dei Paschi dei Siena SpA surging 6.5 percent to 22.4 euro cents, and Banco Santander SA (SAN) rising 6 percent to 5.67 euros. Credit Agricole SA (ACA) increased 7.6 percent to 4.64 euros.

Rio Tinto Group (RIO) added 0.7 percent to 2,735.5 pence as a gauge of European mining shares rebounded from yesterday’s loss, posting the second-best group performance on the Stoxx 600. Glencore International Plc (GLEN) gained 7.7 percent to 385.1 pence and Xstrata Plc (XTA) rallied 5.7 percent to 952.2 pence.

Iliad SA (ILD), the mobile-phone company that shook the French market with 2 euro-a-month packages, jumped 4.4 percent to 126 euros, the highest price since at least 2004, as it reported sales and profit that beat analyst projections after grabbing 3.6 million subscribers in the first six months of its venture into wireless services.

Neste Oil

Neste Oil Oyj (NES1V), Finland’s only oil refiner, rallied 3.9 percent to 9.16 euros after Goldman Sachs Group Inc. raised the stock to buy from sell.

Lagardere SCA (MMB), France’s largest publishing company, jumped 3.5 percent to 22.35 euros after Credit Suisse Group AG said there are “strong reasons” to purchase the stock. Lagardere late yesterday reiterated its recurring earnings before interest and taxes target.

Aeroports De Paris (ADP), the operator of the Charles de Gaulle and Orly airports, fell 2.5 percent to 63.01 euros as first-half net income dropped 18 percent to 147 million euros. Kepler Capital Markets cut the stock to reduce, the equivalent of sell, from hold.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

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


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