Bloomberg News

European Stocks Advance as Portuguese Lenders Lead Rally

July 16, 2014

European stocks advanced the most since April as Portuguese banks led a rally by euro-zone lenders and a report showed China’s economy expanded at a better-than-expected pace.

Banco Espirito Santo SA jumped the most in at least 21 years after a Portuguese newspaper said the lender may raise 2 billion euros ($2.7 billion) from new shareholders to strengthen its capital ratios. Rio Tinto Group added 2.8 percent as the mining company said quarterly iron-ore production climbed 11 percent. Gtech SpA gained 4.1 percent after agreeing to buy International Game Technology for $4.7 billion.

The Stoxx Europe 600 Index rose 1.3 percent to 342.97 at the close in London. The benchmark dropped the most since March last week after one of Banco Espirito Santo’s group companies failed to pay back some debt, igniting concern about lenders in the euro zone’s most indebted nations.

“The periphery is very strong today,” Herbert Perus, who helps oversee $36 billion as head of equities at Raiffeisen Capital Management in Vienna, said in a phone interview. “The periphery bank stocks that were sold heavily are rebounding today. The China data is a part of the overall good picture and is more for the very short-term investors.”

Banco Espirito Santo jumped 20 percent to 45.6 euro cents. Diario Economico reported that the bank plans to strengthen its capital ratios. The newspaper didn’t say how it obtained the information. Rioforte Investments SA, which has an indirect stake in the lender, plans to file for protection from creditors, according to a person familiar with the matter. Rioforte owns 49 percent of Espirito Santo Financial Group, which has a 20 percent stake in the lender.

Portuguese Equities

Portugal’s PSI 20 Index climbed 3.1 percent. Banco Comercial Portugues SA rallied 6.3 percent to 10.6 euro cents. All 18 western-European markets advanced today. France’s CAC 40 gained 1.5 percent and Germany’s DAX rose 1.4 percent, while the U.K.’s FTSE 100 added 1.1 percent.

Banco Santander SA (SAN), Spain’s biggest lender, rose 2 percent to 7.44 euros. Banco Bilbao Vizcaya Argentaria SA, the second largest, added 1.7 percent to 9.14 euros, while Banco de Sabadell SA rose 6.4 percent to 2.45 euros.

Portugal Telecom SGPS SA increased 3.3 percent to 1.89 euros. Rioforte yesterday failed to pay some short-term debt to the telecommunications operator.

Chinese Growth

In China, a report showed that economic growth increased for the first time in three quarters. Gross domestic product rose 7.5 percent in the April-June period from a year earlier, according to the statistics bureau. That beat the 7.4 percent median estimate in a Bloomberg News survey.

Commodity producers posted the biggest gain by an industry group on the Stoxx 600. Rio Tinto added 2.8 percent to 3,334.5 pence. The world’s second-largest mining company reported that iron-ore output rose to 57.5 million metric tons in the three months to June 30 from 51.8 million tons a year earlier. Analysts had forecast 57.7 million tons, according to estimates compiled by Bloomberg.

Gtech climbed 4.1 percent to 19.19 euros. The purchase of IGT gives Gtech control of the world’s biggest slot-machine maker. The Italian company will pay $18.25 for each share in Las Vegas-based IGT, it said in a statement today.

ARM Holdings Plc, the British company that supplies the chip designs for Apple Inc.’s iPad, increased 2.3 percent to 853 pence. Intel Corp. (INTC:US), the world’s largest maker of computer processors, yesterday forecast third-quarter sales that exceeded analysts’ projections (INTC:US).

Husqvarna, Shire

Husqvarna AB (HUSQB) jumped 7.9 percent to 55.55 kronor. The world’s biggest maker of powered garden tools reported second-quarter operating income of 1.38 billion kronor ($202 million), exceeding estimates of 1.28 billion kronor.

Shire Plc fell 1.6 percent to 4,786 pence after U.S. Treasury Secretary Jack Lew said American companies should be prevented from renouncing their citizenship to avoid paying taxes. The Dublin-based drugmaker said on July 14 that it would back a takeover bid from AbbVie Inc. after the U.S. company increased its offer. The deal would allow AbbVie to move its tax residence to the U.K.

Tele2 AB (TEL2B) retreated 1.6 percent to 81.50 kronor. The Swedish telecommunications company lowered its forecast for 2014, projecting revenue for the year of 24.8 billion kronor to 25.2 billion kronor. Tele2 revised its projections after agreeing to sell its Norwegian business to TeliaSonera AB.

In the U.S., a Federal Reserve report showed that industrial production rose at a slower-than-expected rate in June. Output increased 0.2 percent, less than the 0.3 percent median estimate of economists surveyed by Bloomberg. The Fed revised the figure for May down to 0.5 percent.

The volume of shares changing hands in Stoxx 600-listed companies was 4.1 percent greater than the average of the past 30 days, according to data compiled by Bloomberg.

To contact the reporter on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net

To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net Will Hadfield, Srinivasan Sivabalan


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