Bloomberg News

European Stocks Climb Amid Optimism Over U.S. Debt-Ceiling Deal

October 15, 2013

European stocks rose for a fourth day, the longest winning streak in two months, amid optimism Senate leaders will forge a deal to reopen the U.S. government and avoid a breach of the debt limit. U.S. index futures were little changed, while Asian shares advanced.

Rio Tinto Group added 3.2 percent after saying third-quarter iron ore output rose 1 percent. Ashtead Group Plc gained 2.8 percent as JPMorgan Chase & Co. raised its rating on the building-equipment rental company. Burberry Group Plc lost 4.9 percent after saying Chief Executive Officer Angela Ahrendts will depart for Apple Inc. Schindler (SCHP) Holding AG declined 6.4 percent after the Swiss elevator maker cut its profit forecast for the year.

The Stoxx Europe 600 Index rose 0.8 percent to 314.81 at 10:23 a.m. in London, its highest level in three weeks. The gauge has advanced 1.4 percent in October even as U.S. lawmakers struggled to agree on a budget, forcing the first partial government shutdown in 17 years. Standard & Poor’s 500 Index futures added 0.2 percent, while the MSCI Asia Pacific Index climbed 0.4 percent today.

“We had very positive comments from the Senate leaders, and if you take those comments at face value, a deal looks fairly imminent,” Otto Waser, chief investment officer at R&A Research & Asset Management AG in Zurich, said by telephone today. “The market is back to the levels it was at before the entire crisis talks started.”

U.S. Senate Majority Leader Harry Reid, a Democrat, said “tremendous progress” had been made during negotiations, though “we are not there yet.” Leaders are working on an deal to suspend the debt ceiling through Feb. 7 and fund the government through Jan. 15, a person familiar with the talks said, speaking on the condition of anonymity.

Possible Delays

The possible deal could still face procedural delays in the Senate and an uncertain path in the Republican-controlled House of Representatives, where Speaker John Boehner would have to decide whether to allow a vote or make changes. Should Congress fail to act, the U.S. government would run out of borrowing authority in two days and start missing debt payments sometime between Oct. 22 and Oct. 31, according to the Congressional Budget Office.

The U.S. will not default, former Treasury Secretary Lawrence Summers said in Seoul today. Senate Minority Leader, Republican Mitch McConnell, said he shares Reid’s optimism after talks in Washington.

German investor confidence increased for a third month in October. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, rose to 52.8 from 49.6 in September. That’s the highest since April 2010. Economists predicted no change, according to the median of 40 estimates in a Bloomberg News survey.

Rio Tinto

Rio Tinto rose 3.2 percent to 3,183 pence. The world’s second-largest mining company said it produced 53.4 million metric tons of iron ore in the three months to Sept. 30, compared with 52.6 million tons a year earlier. That compares with the 53.3 million-ton median estimate of analysts surveyed by Bloomberg.

A gauge of resources stocks posted the biggest gain of the 19 industry groups on the Stoxx 600. Lonmin Plc, the world’s third-biggest platinum producer, added 3.2 percent to 326.6 pence, and Antofagasta Plc climbed 2.8 percent to 891 pence.

Ashtead (AHT) gained 2.8 percent to 646.5 pence. JPMorgan raised its rating on the shares to overweight, similar to buy, from neutral, saying earnings may increase as much as 41 percent in fiscal year 2016 as its markets recover.

Man Group Plc (EMG) rallied 4.8 percent to 82.45 pence. UBS AG added the world’s largest publicly traded hedge-fund manager to its most-preferred list, citing the recent good performance of its GLG Partners unit.

Casino Guichard-Perrachon

Casino Guichard-Perrachon SA (CO) jumped 3.7 percent to 82.66 euros, the highest price since May. The owner of the Monoprix and Geant supermarket chains reported third-quarter revenue of 11.8 billion euros ($16 billion), exceeding analysts’ projection of 11.7 billion euros. Raymond James Asset Management International raised its price estimate for the shares to 88 euros apiece from 85 euros after the results.

Burberry (BRBY) fell 4.9 percent to 1,507 pence, its biggest drop since July 3. Christopher Bailey will become CEO of the largest British luxury-goods producer, as Ahrendts departs to head Apple’s retail and online business.

Retail revenue advanced to 694 million pounds ($1.1 billion) in the six months through September, Burberry said today in a separate statement. Analysts predicted 698 million pounds, according to the median of 13 estimates compiled by Bloomberg. Comparable-store sales increased 13 percent, matching analysts’ estimates.

Schindler Forecast

Schindler slid 6.4 percent to 124.40 Swiss francs, for the biggest drop on the Stoxx 600. Operating profit fell 5.7 percent to 682 million francs ($749 million) in the nine months through September from a year earlier. The company also said full-year net profit will be no more than 550 million francs, after predicting earlier this year it would be as much as 600 million francs.

Kuehne and Nagel International AG declined 2.5 percent to 114.80 francs. The world’s biggest sea-freight forwarder reported third-quarter profit that missed analysts’ estimates as volumes stagnated. Earnings before interest and taxes, or Ebit, rose 8.3 percent to 195 million francs, the company said today. The average analyst estimate was for 201.9 million francs.

To contact the reporter on this story: Inyoung Hwang in London at ihwang7@bloomberg.net

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


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