Bloomberg News

European Stocks Advance on China Manufacturing Expansion

November 22, 2012

European (SXXP) stocks advanced for a fourth day, posting the longest winning streak in five weeks, after a report signaled Chinese manufacturing expanded for the first time in 13 months.

SABMiller Plc (SAB), the world’s second-largest brewer, jumped the most in 13 months after reporting first-half profit that beat estimates. Daily Mail & General Trust Plc (DMGO), publisher of Britain’s Daily Mail newspaper, surged the most in 3 1/2 years after announcing a share buyback. Alcatel-Lucent SA soared 16 percent after the company was said be in financing talks with Goldman Sachs Group Inc.

The Stoxx Europe 600 Index rose 0.6 percent to 271.7, a two-week high, at the close in London. The benchmark gauge has rallied 16 percent from its 2012 on June 4 as the European Central Bank and the Federal Reserve expanded their asset- purchase plans. The U.S. markets are closed today for the Thanksgiving holiday.

“Everyone is waiting for the brakes to be eased a bit after the new formation of the government,” said Christian Zogg, who manages about $540 million as head of equity and fixed income at LLB Asset Management AG in Vaduz, Liechtenstein. “If the Chinese economy wants to grow about 8 percent, it needs a purchasing managers’ index that’s over 50.”

A PMI released today by HSBC Holdings Plc and Markit Economics showed a preliminary reading of 50.4 for November, adding to signs that growth in the world’s second-largest economy is rebounding after a seven-quarter slowdown. That compared with a final level of 49.5 in October. A reading above 50 indicates expansion.

Euro-Area Manufacturing

Euro-area factory output contracted less than economists had estimated, another Markit report showed. The measure of manufacturing climbed to 46.2 this month from 45.4 in October. That beat the average economist estimate of 45.6 in a Bloomberg survey. Separate manufacturing PMIs for Germany and France, Europe’s two biggest economies, also beat projections.

Spain’s 10-year government bonds rose for a third day as the nation’s borrowing costs declined when it sold 3.88 billion euros of securities, exceeding its maximum target, for debt due in 2015, 2017 and 2021.

The region’s debt crisis and a deadlock over Greek aid raise the stakes for European Union budget talks starting today in Brussels, testing whether the 27-nation bloc is heading for more integration.

National benchmark indexes climbed in all of the 18 western-European markets. France’s CAC 40 increased 0.6 percent, the U.K.’s FTSE 100 rose 0.7 percent and Germany’s DAX jumped 0.8 percent.

SABMiller Gains

SABMiller advanced 6.4 percent to 2,801 pence, for the biggest increase since October 2011. Earnings before interest, taxes and amortization, excluding some items, rose 17 percent to $3.17 billion, the company said. That compared with the $3.1 billion median estimate of 10 analysts surveyed by Bloomberg.

Daily Mail climbed 11 percent to 524 pence, for the largest rally since April 2009. The company said it will buy back shares for as much as as much as 100 million pounds ($160 million). Daily Mail also said its net debt dropped to 613 million pounds in the year ended Sept. 30, from 719 million pounds 12 months earlier.

Separately, Liberum Capital Ltd. said Daily Mail has become more of a business-to-business company than a newspaper group and its shares must be re-rated accordingly.

Alcatel Financing

Alcatel-Lucent surged 16 percent to 92.5 euro cents, the sharpest increase since February 2011, after people familiar with the situation said the company is in talks with Goldman Sachs about obtaining a loan to strengthen the unprofitable network equipment vendor’s balance sheet.

Under terms still being discussed, the New York-based investment bank would grant Alcatel-Lucent funding of an undisclosed amount, while the Paris-based firm would offer some of its assets as collateral, said the people, who asked not to be named because the deal isn’t final.

Nokia Oyj (NOK1V) climbed 1.3 percent to 2.52 euros, the highest price since Aug. 27, as Danske Bank A/S raised the stock to buy from sell and more than doubled its price estimate to 2.90 euros. Danske said Nokia’s 2013 outlook continues to improve.

EasyJet Plc (EZJ) added 1.7 percent to 693.5 pence after Barclays Plc raised Europe’s second-biggest discount airline to equal weight, a recommendation similar to hold, from underweight, saying the company improved both “revenue and non-fuel cost fundamentals.”

Air France-KLM (AF) Group advanced 2.6 percent to 6.78 euros and Deutsche Lufthansa AG (LHA) rose 4.9 percent to 12.51 euros. Barclays raised its price estimates for the airlines by 58 percent to 6.30 euros and 12 percent to 11.50 euros, respectively, citing lower restructuring risk.

The volume of shares changing hands in Stoxx 600 companies was 32 percent lower than the 30-day average, according to data compiled by Bloomberg.

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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