Bloomberg News

European Stocks Climb on Spain Bailout Speculation

November 13, 2012

European Stocks Fall a Fifth Day on Disagreement Over Greek Debt

A financial trader speaks on the telephone as he monitors trading information displayed on his computer screens at Aurel BGC's brokerage in Paris. Photographer: Balint Porneczi/Bloomberg

European (SXXP) stocks climbed, halting a four-day decline for the benchmark Stoxx Europe 600 Index, as yields on benchmark Spanish bonds slipped amid speculation that the country’s government will soon ask for a bailout.

Italian and Spanish lenders rallied as Intesa Sanpaolo SpA (ISP) jumped 5.2 percent after reporting that operating profit surged in the third quarter. EON AG slumped 12 percent after Germany’s biggest utility lowered its earnings forecast for 2013. Vodafone Group Plc (VOD) slid 2.5 percent after the world’s second-largest mobile-phone company took a $9.4-billion writedown for its operations in Spain and Italy.

The Stoxx 600 rose 0.4 percent to 270.6 at the close, erasing an earlier decline of as much as 0.8 percent. The equity benchmark fell 1.9 percent from President Barack Obama’s re- election on Nov. 6 through yesterday as investors’ attention turned to impending U.S. tax increases and spending cuts, known as the fiscal cliff, and the European debt crisis.

“There are rumors that a bailout for Spain is imminent and that has pushed bond yields down,” said Arnaud Scarpaci, a fund manager at Agilis Gestion SA in Paris, which oversees about $77 million. “That explains the violent rebound in stocks.”

European stocks rebounded as yields on benchmark 10-year Spanish bonds dropped four basis points to 5.85 percent.

National benchmark indexes gained in 14 of 18 western- European markets today. France’s CAC 40 (CAC) rose 0.6 percent, while the U.K.’s FTSE 100 advanced 0.3 percent. Germany’s DAX climbed less than 0.1 percent.

Financing Gap

Euro-area finance ministers gave Greece an extra two years to cut its budget deficit to 2 percent of gross domestic product, pledging to plug the resulting financing gap to prevent the country from leaving the single currency.

Finance ministers put off until Nov. 20 a decision on how to cover additional Greek needs of as much as 32.6 billion euros ($41 billion) and left unclear whether the International Monetary Fund will continue to contribute. IMF Managing Director Christine Lagarde disagreed with a decision by the representatives of the 17-nation currency zone to postpone the goal of getting Greece’s debt down to 120 percent of GDP by two years, until 2022.

“European finance ministers now have to grapple with two particularly thorny questions: how to finance Greece for the next four years and how to ensure that Greece’s burgeoning debt burden is sustainable?” James Nixon, an economist at Societe Generale SA in London, wrote in a report today.’

Intesa Surges

Intesa Sanpaolo soared 5.2 percent to 1.26 euros. Italy’s second-biggest bank reported that operating earnings jumped 45 percent to 2.28 billion euros and capital levels rose.

“Intesa presented a very healthy set of results,” Fabrizio Bernardi, a Milan-based analyst at Fidentiis Equities, wrote in a note to clients. “Operating income is above expectations due to better revenues and costs.”

A gauge of European lenders advanced 1.6 percent for the largest gain of the 19 industry groups on the Stoxx 600.

UniCredit SpA (UCG) climbed 4.4 percent to 3.52 euros. Italy’s biggest bank reported third-quarter profit that beat analysts’ estimates after a record loss a year earlier because of writedowns. Net income increased to 335 million euros, compared with a net loss of 10.6 billion euros a year earlier when the Milan-based lender booked goodwill impairments of 8.7 billion euros. Profit surpassed the 99 million-euro average estimate of 13 analysts surveyed by Bloomberg.

Sonova Soars

Sonova Holding AG (SOON) surged 8.5 percent to 100.90 Swiss francs, its biggest rally in a year. The Swiss provider of hearing products reported first-half profit that beat analysts’ estimates as its cochlear-implant segment became profitable and the hearing-aid business expanded in the U.K. and Spain.

ITV Plc (ITV) advanced 9 percent to 94.6 pence. The U.K.’s biggest terrestrial commercial broadcaster said group external revenue rose 4 percent in the first nine months of this year. The company also raised a target for cost savings this year.

EON slumped 12 percent to 14.64 euros, its biggest retreat in 20 years, after saying yesterday its forecast of 3.2 billion euros to 3.7 billion euros of underlying net income next year “no longer seems achievable” because gas-fired power plants aren’t making money. The company also said it will consider cutting dividend payments.

The utility today reported profit that more than doubled in the first nine months from a year earlier. RWE AG (RWE) slid 1.2 percent to 32.93 euros. The Stoxx 600 Utilities Index lost 1.9 percent, its largest retreat since September.

Vodafone, Pirelli

Vodafone slid 2.5 percent to 162.5 pence as the announcement of the 5.9 billion-pound ($9.4 billion) impairment outweighed its decision to start a 1.5 billion-pound buyback plan. Verizon Wireless will pay an $8.5 billion dividend to its co-owners, Vodafone and Verizon Communications Inc., by the end of 2012, enabling Vodafone to finance the share buyback.

Service revenue fell 1.4 percent in the quarter ended Sept. 30, its first decline in 10 quarters and double the average analyst projection for a contraction of 0.7 percent, according to data compiled by Bloomberg.

Pirelli & C SpA (PC) dropped 2.8 percent to 8.43 euros. Europe’s third-largest tiremaker yesterday lowered its forecast for revenue in 2012 by 250 million euros to 6.15 billion euros because of Europe’s economic slowdown.

The Milan-based company predicted that debt will rise to more than 1.2 billion euros from a previous target of less than 1.1 billion euros, according to a statement after markets closed yesterday. Third-quarter net income fell 7.3 percent to 87 million euros, missing the average estimate of 102.2 million euros in a Bloomberg survey of six analysts.

K+S, FLSmidth

K+S AG (SDF) sank 4.5 percent to 34.29 euros. Europe’s largest potash maker said it expects sales and profit in 2012 to only reach the bottom of its targeted range as delays on Chinese and Indian contracts restrain market prices for fertilizer.

FLSmidth & Co. A/S tumbled 6.6 percent to 329.40 kroner. The Danish maker of mining equipment reported third-quarter net income that missed analysts’ estimates. It also forecast an annual profit margin before interest and taxes of 8 percent, compared with a previous projection of as much as 9 percent.

Mondi Plc declined 2.4 percent to 640 pence. Barclays Plc sold 19.3 million shares in the largest maker of office paper and industrial bags in Europe at 634 pence apiece on behalf of a client, according to two people close to the deal who asked not to be identified because the transaction is private.

To contact the reporters on this story: Alexis Xydias in London at axydias@bloomberg.net; Adria Cimino in Paris at acimino1@bloomberg.net

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


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