Bloomberg News

European Stocks Rise First Day in Four; Burberry Gains

October 11, 2012

European Stocks Rise for the First Day in Four

Traders work on the floor of the Frankfurt Stock Exchange in Frankfurt. Photographer: Ralph Orlowski/Bloomberg

European stocks advanced for the first time in four days as U.S. jobless claims fell to a four- year low and Burberry Group Plc (BRBY) led luxury-goods makers higher.

Burberry jumped the most in more than 10 years as it reported second-quarter same-store sales that topped analyst estimates. Carrefour SA (CA) climbed 3.7 percent after the world’s second-largest retailer posted third-quarter sales that beat estimates. Banco Popular Espanol SA (POP) led Spanish banks lower after Standard & Poor’s downgraded the country’s debt to one level above junk.

The Stoxx Europe 600 Index (SXXP) climbed 0.8 percent to 270.84 at the close of trading. The measure has still lost 1.2 percent so far this week as the International Monetary Fund cut its global growth forecasts and European Union leaders met to discuss the region’s debt crisis.

“The U.S. jobless report was very positive,” said Pierre Mouton, a portfolio manager who helps oversee $6 billion at Notz Stucki & Cie. in Geneva. “These numbers are encouraging and should help the market recover.”

Jobless claims in the world’s biggest economy fell unexpectedly to the lowest since February 2008. Applications for unemployment benefits dropped 30,000 to 339,000 in the week ended Oct. 6 from 367,000 for the prior period, Labor Department data showed. Economists forecast 370,000 claims, according to the median estimate in a Bloomberg survey.

U.S. Economy

Last week, a Labor Department release showed the jobless rate unexpectedly fell to 7.8 percent in September, the lowest since January 2009.

The U.S. trade deficit widened in August to $44.2 billion from a revised $42.5 billion in July, a Commerce Department report showed. Economists had projected an increase to $44 billion.

The U.S. economy expanded “modestly” last month and conditions in manufacturing were “somewhat improved,” the Federal Reserve said yesterday in its Beige Book business survey, based on accounts from the 12 district Fed banks.

Demand rose at an Italian debt auction today. The Rome- based Treasury sold 3.75 billion euros of its benchmark three- year debt to yield 2.86 percent at an auction today, as investors bid for 1.67 times the amount offered, up from 1.49 times last month.

Spain Downgrade

S&P lowered Spain’s debt rating to one level above junk, citing increasing economic and political risks. The country’s worsening recession is “limiting the Spanish government’s policy options,” S&P said in a statement late yesterday, lowering its rating by two levels to BBB- from BBB+. S&P assigned a negative outlook to Spain’s long-term rating and cut the short-term sovereign level to A-3 from A-2.

IMF Managing Director Christine Lagarde said today at a press conference in Tokyo that Greece should get two years to meet fiscal targets and suggested debt reductions are needed before a 130 billion-euro ($167 billion) bailout can proceed.

Separately, German Finance Minister Wolfgang Schaeuble said today euro-area governments agree that any decision on Greece will be taken after the IMF, the European Commission and the ECB publish their review.

The Stoxx 600 has rallied 16 percent from a June 4 low as the ECB agreed on an unlimited bond-buying plan and the Fed announced a third round of quantitative easing.

“Substantial monetary stimulus from global central banks is likely to provide support for financial markets over the near term,” Luca Paolini, chief strategist at Pictet Asset Management in London, said in e-mailed comments. “We remain overweight in European stocks mainly on valuation grounds.”

National Indexes

National benchmark indexes climbed in 16 of the 18 western European markets. The U.K.’s FTSE 100 added 0.9 percent, France’s CAC 40 gained 1.4 percent, while Germany’s DAX rose 1.1 percent.

Burberry surged 13 percent to 1,136 pence, the biggest gain since at least July 2002, after the U.K.’s largest luxury-goods maker said sales at stores open at least a year rose 1 percent in the second-quarter, beating the average analyst estimate calling for a 1 percent drop.

That’s an improvement on the unchanged performance Burberry reported on Sept. 11 for the first 10 weeks of the period. Burberry raised its outlook for retail and wholesale operating margins in the first half to be “at least in line” with last year, rather than lower as previously forecast.

Louis Vuitton

A gauge of personal and household-goods companies was the second-biggest gainer among 19 industry groups in the Stoxx 600.

LVMH Moet Hennessy Louis Vuitton SA (MC) climbed 3.8 percent to 122.95 euros, Cie. Financiere Richemont SA added 4.5 percent to 59.90 Swiss francs and Christian Dior SA (CDI) advanced 3.6 percent to 108.30 euros.

Carrefour advanced 3.7 percent to 16.58 euros after the French retailer said third-quarter revenue rose 2.1 percent to 22.6 billion euros, topping the average analyst estimate of 22.4 billion euros.

BAE Systems Plc (BA/) rose 2.4 percent to 328.5 pence after Chief Executive Officer Ian King said the company is “strong and financially robust.” Adjusted earnings per share will show “modest growth” this year if price negotiations with Saudi Arabia over a fighter-jet order are concluded on time, the London-based company said today.

BAE and European Aeronautic, Defence & Space Co. said yesterday they terminated their planned merger because of government resistance.

Bumi Jumps

Bumi Plc (BUMI) soared 39 percent to 259 pence, the most since its London listing in July 2010, after PT Bakrie & Brothers Tbk proposed an asset swap. The Bakrie Group offered to exchange a 23.8 percent stake in Bumi for 10.3 percent of PT Bumi Resources, Bumi said in a statement.

The proposal comes after Bumi said last month it began investigating “potential financial and other irregularities” at Bumi Resources and hired lawyers to look into a $637 million writedown of development funds and exploration assets.

Banco Popular slid 4.9 percent to 1.30 euros. Bankia SA (BKIA) dropped 0.3 percent to 1.02 euros, paring earlier losses of as much as 3.8 percent.

Siemens AG (SIE) retreated 1.3 percent to 77.05 euros after Deutsche Bank AG cut its recommendation on the shares to hold from buy.

Coca-Cola Hellenic Bottling SA dropped 4.9 percent to 15.66 euros as Greece’s largest company by market value plans to transfer its main stock listing from Athens to London.

Coca-Cola HBC AG, a new company established in Switzerland by one of the bottler’s main shareholders will make a share- exchange offer for Coca-Cola Hellenic and seek a primary listing in the U.K., according to a regulatory filing.

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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