Bloomberg News

European Stocks Climb on SAP Revenue Forecast

October 24, 2012

European Stocks Advance as Slump in Chinese Manufacturing Eases

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

European stocks advanced, after yesterday tumbling the most in four weeks, as technology companies rallied, outweighing worsening economic data from the euro area.

SAP AG (SAP) gained 4.2 percent after the world’s biggest maker of business-management software raised its full-year revenue target as license sales beat estimates. STMicroelectronics NV (STM) climbed 4.2 percent on plans to cut costs. Volvo AB and Nordea Bank AB (NDA) retreated more than 1.5 percent after the companies reported third-quarter earnings that missed projections.

See Markets Overview

The Stoxx Europe 600 Index (SXXP) rose 0.4 percent to 269.52 at the close in London, after earlier falling as much as 0.4 percent. The equity benchmark dropped 1.7 percent yesterday as company earnings disappointed investors. The gauge has rallied 15 percent from this year’s low on June 4 as the European Central Bank approved an unlimited bond-buying plan for the most-indebted members of the currency zone.

“People were expecting a pretty undynamic earnings season given the macro drop, so there are few surprises on that front,” Philip Saunders, a portfolio manager at Investec Asset Management, said on Bloomberg Television in London. “Clearly some leading stocks have disappointed, but beneath the surface, there is is some good news as well.”

Stocks slid earlier as separate reports showed euro-area services and manufacturing output have contracted more than economists had forecast, while German business confidence unexpectedly declined.

Business Confidence

A euro-area composite index based on a survey of purchasing managers in both industries fell to 45.8 in October from 46.1 in September, Markit Economics said today. That trailed the median economist forecast for a reading of 46.5. A reading below 50 means that activity contracted.

In Munich, the Ifo institute said its business-climate index, based on a survey of 7,000 executives, dropped to 100 from 101.4 in September. That’s the sixth straight decline and the lowest reading since February 2010. Economists had predicted an increase to 101.6.

“Europe has negative economic growth and has huge headwinds which are not going to disappear with some Hollywood ending in the next six months or so,” Alex Friedman, global chief investment officer at UBS AG, also said on Bloomberg Television. “I don’t think there is any way to say that Europe is about to turn a corner.”

National benchmark indexes climbed in 15 of the 18 western- European markets. France’s CAC 40 advanced 0.6 percent, Germany’s DAX rose 0.3 percent and the U.K.’s FTSE 100 added 0.1 percent.

Chinese Manufacturing

Stocks also advanced today after a report in China showed a measure of manufacturing in the world’s second-largest economy rose for October. The preliminary reading of a purchasing managers’ index from HSBC Holdings Plc and Markit increased to 49.1. The final level in September was 47.9.

In the U.S., a release showed that sales (VOLVB) of new houses last month exceeded economists’ estimates.

A gauge of European technology companies jumped 2.2 percent, dragging the Stoxx 600 higher.

SAP rallied 4.2 percent to 55.07 euros after the company said sales of new licenses, an indicator of future revenue, increased 12 percent to 1.03 billion euros ($1.3 billion), excluding currency swings. That exceeded the average analyst estimate of 980 million euros in a Bloomberg survey.

The company also forecast that growth in software and related services sales, based on non-IFRS accounting rules, will reach the upper end of a range of 10.5 percent to 12.5 percent this year, because of contributions from Ariba Inc. and SuccessFactors Inc.

STMicro, ASML

STMicroelectronics gained 4.2 percent to 4.85 euros after Europe’s largest chipmaker said it will cut costs by $150 million a year by the end of 2013 and will temporarily close plants. The company forecast that fourth-quarter revenue may fall as much as 5 percent amid weakening demand in Europe.

ASML Holding NV (ASML), Europe’s largest semiconductor-equipment supplier, advanced 2.7 percent to 41.58 euros. ARM Holdings Plc (ARM) climbed 5.6 percent to 675.5 pence, extending yesterday’s 7.7 percent rally.

Volkswagen AG climbed 3.1 percent to 151 euros after Europe’s largest carmaker reported earnings that met analysts’ estimates and sales that increased.

Operating profit fell 19 percent in the third quarter to 2.34 billion euros, in line with the 2.39 billion-euro average analyst estimate compiled by Bloomberg. Sales rose 27 percent to 48.8 billion euros.

Reckitt Benckiser

Reckitt Benckiser Group Plc (RB/) gained 3.7 percent to 3,768 pence, the highest price since at least 1988, after the maker of Nurofen reported revenue that beat estimates. Non-pharmaceutical sales rose 5 percent on a comparable basis for the third quarter, beating the median analyst estimate for revenue to climb 4 percent.

Telenor ASA (TEL) jumped 6.1 percent to 110.70 kroner after Norway’s largest phone operator reported a 41 percent surge in third-quarter net income to 3.65 billion kroner ($634 million) helped by increasing sales in markets such as Thailand and Malaysia. Analysts had predicted profit of 3.4 billion kroner, the average of estimates compiled by Bloomberg. Sales advanced 2.5 percent to 25.3 billion kroner.

Volvo declined 1.9 percent to 88.50 kronor after the world’s second-largest truckmaker reported a 64 percent drop in third-quarter net income to 1.37 billion kronor ($204 million) as vehicle sales fell in South America and Asia.

Earnings fell short of the 2.83 billion-krona average of 12 analyst estimates compiled by Bloomberg. Sales dropped 6.2 percent to 67.1 billion kronor.

Nordea, Peugeot

Nordea Bank slid 2.6 percent to 60.10 kronor after the Nordic region’s largest lender reported a 70 percent plunge in third-quarter net income to 686 million euros, missing the 751 million-euro average analyst estimate in a Bloomberg survey. Impairments more than doubled from a year earlier because of losses in shipping and Danish real estate.

PSA Peugeot Citroen dropped 4.6 percent to 5.56 euros after the French government guaranteed as much as 7 billion euros of new bonds for Europe’s second-largest carmaker in exchange for greater influence over its strategy.

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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