Bloomberg News

European Stocks Little Changed Near Six-Year High; Miners Rally

January 16, 2014

European stocks were little changed near a six-year high as Citigroup Inc. made a bullish case for investing in mining companies and as initial jobless claims in the U.S. fell to a six-week low.

Rio Tinto Group and BHP Billiton Ltd. advanced at least 2.5 percent each, helping a gauge of mining companies post the best performance among the industry groups on the benchmark index. United Utilities (UU/) Group Plc added 4.6 percent after Morgan Stanley recommended the stock. Cie. Financiere Richemont (CFR) SA fell 2 percent after posting third-quarter sales growth that missed projections. Carrefour SA slid 3.7 percent after France’s largest retailer reported fourth-quarter sales.

The Stoxx Europe 600 Index slipped 0.2 percent to 333.99 at the close of trading in London. The benchmark climbed yesterday to its highest level since January 2008 as the World Bank raised its forecast for global economic growth. The measure has added 1.8 percent in January, after rallying 17 percent in 2013.

“One problem is that everybody is bullish on the market,” Louis de Fels, a Paris-based fund manager at Raymond James Financial Inc., which oversees about $53 billion, said by telephone. “Volatility will still be quite high. It will not be a steady, long increase in the market. There will be ups and downs, but we’re quite positive the market will be higher at the end of the year.”

The volume of shares changing hands in companies listed on the Stoxx 600 was 25 percent higher than the average of the past 30 days, according to data compiled by Bloomberg.

National benchmarks fell in 13 of the 18 western European markets. The U.K.’s FTSE 100 slipped less than 0.1 percent, while Germany’s DAX fell 0.2 percent. France’s CAC 40 retreated 0.3 percent.

American Jobs

A U.S. Labor Department report showed that first-time jobless claims decreased by 2,000 to 326,000 in the week ended Jan. 11, from a revised 328,000 in the previous week. That was the lowest since the week ended Nov. 29.

Commodity producers, as a group, posted the best performance in the Stoxx 600 after Citigroup Inc. turned bullish on European miners for the first time in three years.

“Our move reflects better bottom-up fundamentals, particularly from the major miners,” analysts including Heath R. Jansen wrote in a note. “We would rather be too early than too late in making this call.”

Rio Tinto gained 2.5 percent to 3,334.5 pence. The world’s second-largest mining company cut cash costs by more than $2 billion and halved exploration spending to $948 million last year, beating the targets set by Chief Executive Officer Sam Walsh. Fourth-quarter iron-ore output climbed 7 percent from a year earlier, in line with estimates.

BHP Valuation

BHP Billiton Ltd. increased 3.8 percent to 1,860 pence for the biggest gain since October. Citigroup upgraded its rating on the company to buy from neutral. The brokerage said BHP is trading at a discount to some valuation measures, may deliver 35 percent cumulative growth by the end of the decade, could deliver cost savings and may continue to sell assets.

United Utilities advanced 4.6 percent to 689 pence. Morgan Stanley upgraded the U.K.’s largest publicly traded water supplier to overweight, a rating similar to buy, from equal weight. The brokerage said the company trades at the lowest premium to its regulatory capital value compared with rivals. RCV is an accounting norm developed by the U.K. Water Services Regulation Authority for setting price limits.

Ladbrokes Plc (LAD) rose 1.7 percent to 176 pence. The U.K. operator of 2,100 betting outlets said that 2013 operating profit will be in the middle of analysts’ estimated range of 129.8 million pounds to 151 million pounds and consistent with the forecast the company gave in November.

Home Retail

Home Retail Group Plc climbed 1.5 percent to 204.1 pence. The owner of the Argos and Homebase chains said pretax profit will be near the top end of analysts’ projected range of 90 million pounds to 109 million pounds. The company also named John Walden, managing director of Argos, as chief executive officer, replacing Terry Duddy.

Richemont dropped 2 percent to 87 Swiss francs. The owner of the Cartier brand said revenue in the October-December period rose 2.8 percent to 2.94 billion euros. Analysts in a Bloomberg survey had expected sales of 3.05 billion euros.

Carrefour slid 3.7 percent to 27.25 euros. The retailer said total revenue fell 1.5 percent to 22.2 billion euros, in line with the average of four analysts’ estimates.

Royal Ahold NV lost 2.5 percent to 12.83 euros. The biggest Dutch retailer posted fourth-quarter revenue of 7.47 billion euros, missing the median projection of 7.57 billion euros.

Premier Oil Plc tumbled 6.5 percent to 288 pence, its lowest price since June 2010. Liberum Capital Ltd. said the U.K. explorer’s forecast for 2014 output in the range of 58,000 to 63,000 barrels of oil equivalent a day missed its estimate.

ASML Holding NV, Europe’s largest semiconductor-equipment supplier, retreated 4.5 percent to 62.78 euros. Taiwan Semiconductor Manufacturing Co. forecast first-quarter revenue that missed estimates.

To contact the reporters on this story: Inyoung Hwang in London at ihwang7@bloomberg.net; Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net

To contact the editor responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net


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