Bloomberg News

European Stocks Are Little Changed After U.S. GDP Growth Report

July 31, 2013

European stocks were little changed, with the Stoxx Europe 600 Index completing its biggest monthly gain since October 2011, as a report showed the U.S. economy expanded at a faster-than-expected pace.

Anheuser-Busch InBev NV jumped 6.9 percent after the maker of Stella Artois lager posted earnings that beat estimates. Invensys Plc added 1.1 percent after Schneider Electric SA agreed to buy the company for 3.4 billion pounds ($5.2 billion).

The Stoxx Europe 600 Index added 0.1 percent to 299.58 at the close of trading London, after earlier climbing as much as 0.4 percent and dropping as much as 0.5 percent. The gauge rallied 5.1 percent in July as Federal Reserve President Ben S. Bernanke said the central bank remains flexible on the pace of its bond-buying program. The Fed will reveal the outcome of a two-day policy meeting after European markets close today.

“The U.S. is the engine of global recovery, so the question is how sustainable the economic improvement can be,” said Lorenzo Carcano, senior portfolio manager at B Metzler Seel Sohn & Co KGaA in Frankfurt. “It’s important to look forward and listen to any guidance from Bernanke on the development of the economy, and it’s very key that he manages market expectations. I expect his wording to be cautious, but at some point the Fed will have to reduce stimulus.”

Fed Meeting

Bernanke has said that low inflation and high unemployment mean the central bank needs to continue buying bonds. The Fed will leave the benchmark interest rate at 0.25 percent when it announces its decision, according to every economist in a Bloomberg survey. The central bank may begin to reduce its bond-purchase program in September, economists predicted in a separate survey.

The U.S. economy, the world’s largest, grew at a 1.7 percent annual rate in the second quarter, after expanding at a revised 1.1 percent pace in the first three months of the year, according to a report from the Commerce Department. Economists had predicted a 1 percent expansion for the period, according to the median estimate in a Bloomberg survey.

A separate release showed that companies in the U.S. hired a net 200,000 workers in July, the highest reading this year. Economists had projected a gain of 180,000 for the month. The ADP Research Institute’s report showed that private employers increased their workforce by a revised 198,000 in June.

National benchmark indexes advanced in 11 of the 18 western-European markets today. Germany’s DAX rose 0.1 percent, and France’s CAC 40 added 0.2 percent. The U.K.’s FTSE 100 climbed 0.8 percent.

Beverage Makers

AB InBev jumped 6.9 percent to 72.38 euros, its biggest advance since May 2010. Second-quarter organic normalized earnings before interest, taxation, depreciation and amortization rose 5.8 percent as the company sold more expensive beer in the U.S. Analysts surveyed by Bloomberg had predicted growth of 3.7 percent for the period.

Diageo Plc, which brews Guinness beer, Johnnie Walker whisky and Smirnoff vodka, rose 3.2 percent to 2,054 pence. The world’s biggest distiller posted operating profit excluding some items of 3.53 billion pounds, compared with a 3.48 billion-pound median estimate.

SABMiller Plc added 2.6 percent to 3,220.5 pence, as a gauge of 30 food and beverage companies on the Stoxx 600 posted its biggest gain in almost four weeks.

Invensys advanced 1.1 percent to 496.3 pence after Schneider (SU) Electric said it will buy the company for the equivalent of 502 pence a share. Schneider, which posted first-half earnings today and reaffirmed its Ebita-margin forecast for 2013, added 3.3 percent to 59.91 euros.

Peugeot Gains

PSA Peugeot Citroen, which yesterday won European Commission approval for a 7 billion-euro guarantee from the French government, surged 6.7 percent to 9.60 euros. The carmaker posted an operating loss of 65 million euros in the first half, a narrower deficit that the 295.8 million-euro average of analyst estimates compiled by Bloomberg.

HeidelbergCement AG increased 5.5 percent to 57.74 euros. The cement maker said sales in North America and a recovering market in the U.K. helped profit in the second quarter beat analysts’ estimates.

Eutelsat Communications SA (ETL) declined 6.2 percent to 21.02 euros after predicting sales will grow by more than 2.5 percent for the year 2013 to 2014. The company, which operates 31 satellites, forecast growth of more than 5 percent for the following two years through June 2016. JPMorgan Chase & Co. cut its price target for the stock to 24 euros from 33 euros, saying analysts’ will probably reduce their estimates following the company’s revised guidance.

The number of shares trading hands in Stoxx 600-listed companies was 12 percent lower than the average of the past 30 days, data compiled by Bloomberg show.

The VStoxx Index, which measures the cost of protecting against swings on the Euro Stoxx 50 Index, gained 1.2 percent to 19.06.

To contact the reporter on this story: Sofia Horta e Costa in London at shortaecosta@bloomberg.net

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


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