Bloomberg News

European Stocks Snap Three-Week Decline; GN, Rexam Climb

February 22, 2013

European shares rose for the first week in four as better-than-expected company earnings and measures of German confidence outweighed concern that the U.S. Federal Reserve will scale back its asset-purchase program.

Lafarge SA gained 7.7 percent after saying it will meet a cost-cutting goal ahead of schedule as earnings beat forecasts. Natixis (KN) SA surged as it said it would make a 2 billion-euro ($2.6 billion) exceptional payment to shareholders. A gauge of European commodity companies performed the worst of the 19 industry groups on the Stoxx 600. (SXXP)

The Stoxx 600 climbed 0.4 percent to 288.57 this week. The measure has advanced 3.2 percent this year as U.S. lawmakers agreed on a compromise federal budget avoiding automatic fiscal changes that had threatened to push the world’s biggest economy into recession.

“I expect a bigger correction to come in the next few weeks, so this is a good opportunity to buy shares as companies are able to produce good profits, as we’ve seen this week,” said Thomas Stucki, who helps manage about $3.8 billion as chief investment officer at Hyposwiss Private Bank AG in Zurich. “An important support to the stock market is still the lack of alternatives to equities.”

National benchmark indexes climbed in 10 of the 18 western European markets. The U.K.’s FTSE 100 increased 0.1 percent and France’s CAC 40 added 1.3 percent. Germany’s DAX gained 0.9 percent.

German Confidence

In Germany, investor confidence increased to the highest level in almost three years in February. The index of investor and analyst expectations climbed to 48.2 from 31.5 in January, the ZEW Center for European Economic Research said this week. That exceeded the median estimate of economists in a Bloomberg survey calling for an increase to 35.

Separately, the Ifo institute’s business climate index for Europe’s biggest economy, based on a survey of 7,000 executives, climbed to 107.4 in February from a revised 104.3 in January. The median of 38 forecasts in a Bloomberg News survey had called for an increase to 104.9. The latest reading was the highest since April.

Still, the euro-area economy will shrink for a second year in 2013, driving unemployment higher as governments, consumers and companies curb spending, the European Commission said.

Euro-Area GDP

The 17-nation euro region’s gross domestic product will fall 0.3 percent this year, compared with a November prediction of 0.1 percent growth, the Brussels-based commission forecast. Unemployment will climb to 12.2 percent, up from the previous estimate of 11.8 percent and 11.4 percent last year, it said.

In the U.S., Fed officials debated whether monetary easing risks exacerbating inflation or fueling asset-price bubbles. Several participants at the Federal Open Market committee’s Jan. 29-30 meeting “emphasized that the committee should be prepared to vary the pace of asset purchases, either in response to changes in the economic outlook or as its evaluation of the efficacy and costs of such purchases evolves,” according to minutes released on Feb. 20.

Lafarge (LG) advanced 7.7 percent. The world’s biggest cement maker said it’ll meet most of a cost-cutting goal one year early after fourth-quarter earnings beat analysts’ estimates on rising sales in Asia and Latin America.

Earnings before interest, taxes, depreciation and amortization rose to 856 million euros from 798 million euros a year earlier, the Paris-based company said. Analysts surveyed by Bloomberg had expected 821.6 million euros.

Natixis Payment

Natixis rallied 18 percent. The investment-bank unit of France’s second-largest lender by branches said it will make a payment to shareholders after selling back stakes in its parent’s banking networks. The distribution amounts to 65 cents a share, and comes on top of a proposed dividend of 10 cents a share for 2012.

GN Store Nord A/S (GN) gained 12 percent after the Danish maker of headsets reported fourth-quarter sales rose 12 percent to 1.76 billion kroner ($311 million). That beat the average estimate of 1.68 billion kroner in a Bloomberg survey of 15 analysts. The company also forecast 2013 sales that exceeded analysts’ estimates.

Rexam Plc (REX) climbed 7.3 percent this week. The largest maker of beverage cans said profit before tax was 418 million pounds ($639 million) in 2012, exceeding the 377 million-pound median estimate in a Bloomberg survey.

Miners Slump

A gauge of European mining companies slid 4.8 percent on concern that Chinese calls for curbs on property development will crimp demand for commodities.

BHP Billiton Plc (BLT) and Rio Tinto Group (RIO), the world’s largest miners, slid 6.1 percent and 6.9 percent, respectively. Anglo American Plc (AAL) slipped 4.8 percent.

Royal KPN NV (KPN) plunged 13 percent for the second-worst performance on the Stoxx 600 this week. America Movil SAB, the mobile-phone carrier controlled by billionaire Carlos Slim, will take part in a 3 billion-euro KPN share sale, while declining to participate in a 1 billion-euro sale of so-called hybrid instruments.

RSA Insurance Group Plc (RSA) tumbled 11 percent after announcing a dividend cut. The U.K.’s biggest non-life insurer by market value lowered its payout by 33 percent as its 2012 underwriting profit was eroded by claims related to wet weather in the U.K. and earthquakes in Italy.

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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