Bloomberg News

European Stocks Rally for Fourth Week on China Growth, Bernanke

July 19, 2013

European stocks rose for a fourth week, the longest stretch of gains in two months, boosted by Chinese economic data and assurances from the Federal Reserve that its stimulus program remains flexible.

BHP Billiton Ltd. and Rio Tinto Group climbed more than 3.5 percent after the world’s largest mining companies each reported an increase in iron-ore output. Carrefour SA surged 8.1 percent as sales in the French retailer’s home market stabilized. Banco Popolare SC and Royal Bank of Scotland Group Plc led a rally in financial shares.

The Stoxx Europe 600 Index advanced 1.2 percent to 299.85 this past week, the highest level since May. Fed Chairman Ben S. Bernanke, giving evidence to the House Financial Services Committee on July 17, said the U.S. central bank’s quantitative-easing program is “by no means on a preset course” and bond purchases could be reduced more quickly or expanded as economic conditions warrant.

“The markets put a dovish spin on Bernanke’s testimony to Congress,” said Ioan Smith, a strategist at KCG Europe Ltd. in London. “In the end he didn’t say anything new, but the lack of any definitive signals on the timing of QE tapering gave stocks a boost.”

European equities climbed on July 15 as a report showed China’s gross domestic product expanded 7.5 percent in the second quarter from a year earlier. That matched the median economist forecast in a Bloomberg survey and the government’s target rate for 2013.

China Growth

China’s Finance Minister Lou Jiwei had signaled the previous week that the world’s second-biggest economy may expand at a slower pace this year than the government target. Separately, the People’s Bank of China said yesterday it will remove the floor on lending rates offered by the nation’s financial institutions, giving banks more freedom to set borrowing costs.

The Stoxx 600 has still declined 3.5 percent from a near five-year high on May 22 amid speculation the Fed will begin tapering bond purchases as soon as September. The benchmark measure has climbed 7.2 percent this year.

Minutes from the Bank of England’s July 3-4 meeting released this week showed officials voted unanimously to maintain the central bank’s 375 billion-pound ($572 billion) stimulus program. Paul Fisher and David Miles had previously called for an increase in asset purchases.

In the U.S., earnings at banks including Goldman Sachs Group Inc. (GS:US) and Morgan Stanley beat analysts’ estimates and jobless-benefit claims fell to a two-month low. The benchmark Standard & Poor’s 500 Index rallied to a record.

‘Incredibly Bright’

“We continue to believe that the U.S. will lead the global economic recovery,” said Henk Potts, who helps oversee $282 billion as an equity strategist at Barclays Plc’s wealth unit in London. “The U.S. corporate picture still remains incredibly bright. It continues to support our strategy that investors should be overweight equities.”

National benchmark indexes climbed in 13 of the 18 western European markets this week. The U.K.’s FTSE 100 gained 1.3 percent, France’s CAC 40 (CAC) climbed 1.8 percent and Germany’s DAX Index jumped 1.5 percent.

A gauge of basic-resources companies advanced 4.3 percent for the best performance among 19 industry groups in the Stoxx 600. Rio Tinto climbed 4.2 percent after posting a 7 percent increase in second-quarter iron-ore production and raising its forecast for full-year copper output.

BHP rose 3.9 percent as the world’s largest miner reported a 17 percent increase in fourth-quarter iron-ore production, beating the median analyst estimate in a Bloomberg survey.

Carrefour Climbs

Carrefour jumped 8.1 percent in Paris after France’s biggest retailer said sales at stores open at least a year were unchanged as stronger demand in Latin America helped cushion a drop in Europe during the second quarter. A decline of 1.1 percent in domestic revenue beat the consensus estimate of a 1.8 percent slide, according to Citigroup Inc.

A gauge of banks rose 3.3 percent as the European Central Bank altered its collateral rules for refinancing banks and said it’s looking at ways to boost lending to small and medium-sized companies by changing the eligibility of asset-backed securities.

Banco Popolare rose 12 percent in Milan and RBS rallied 11 percent in London. Commerzbank AG, Germany’s second-largest lender, surged 9.2 percent for the biggest gain in 10 months.

Elsewhere, Electrolux AB (ELUXB) climbed 8.2 percent in Stockholm after the world’s second-largest maker of home appliances raised its forecast for the U.S.

LSE Revenue

London Stock Exchange Group Plc (LSE) jumped 6.6 percent as the operator of Europe’s oldest independent bourse reported a 39 percent increase in first-quarter revenue.

Telecom Italia SpA slid 3.2 percent after Italy’s biggest phone company halted a plan to spin off its fixed-line business.

Ericsson AB dropped 5.7 percent as the largest maker of wireless-network equipment reported second-quarter revenue that missed estimates amid competition with Huawei Technologies Co. for contracts to build and service phone systems.

Nokia Oyj lost 2.8 percent after the Finnish mobile-phone maker reported second-quarter revenue that trailed analysts’ estimates as handset demand fell.

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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