European Stocks Rise as Spain, France Sell Bonds; Commerzbank Shares Climb
Friday, 20 January 2012 | 00:00
European stocks gained for a fourth day, extending a five-month high for the Stoxx Europe 600 Index, as Spain and France sold bonds at lower yields and fewer Americans than forecast filed claims for jobless benefits.
Commerzbank AG (CBK) led a rally in financial shares, surging 15 percent, after outlining measures to boost capital. Alstom (ALO) SA, the world’s third-largest power-equipment maker, jumped 14 percent after predicting “strong” orders in its fiscal fourth quarter. Carrefour SA (CA), the biggest retailer in Europe by sales, dropped 1.1 percent after saying profit was at the lower end of its forecasts.
The Stoxx 600 gained 1.2 percent to 256.57 at the close of trading, the highest since Aug. 2. The gauge has advanced 4.9 percent in 2012, the best start to a year since 1989, as reports around the world added to optimism that the economy is strengthening. Greece’s government headed into a second day of talks with private creditors today in a push to reach an accord that would slash the nation’s debt.
“The results from the Spanish and French bond sales are good,” said Manish Singh, the London-based head of investment at Crossbridge Capital, which has more than $2 billion under management. “But the debate on the Greek debt deal with private investors is damping the optimism. Unless the deal is in the bag, I don’t think the market will rally on successful auctions alone.”
Greek Prime Minister Lucas Papademos is racing to tie up the accord, key to a second financing package for the cash- strapped country, before a March 20 bond payment that will cost 14.5 billion euros ($18.6 billion) Greece doesn’t have.
National benchmark indexes rose in all of Europe’s 18 western markets, except Iceland. France’s CAC 40 increased 2 percent and the U.K.’s FTSE 100 gained 0.7 percent, while Germany’s DAX Index (DAX) climbed 1 percent.
France auctioned 7.97 billion euros of two-, three- and four-year notes in its first sale of medium- and long-term debt after losing its AAA rating at Standard & Poor’s last week. Yields fell on all maturities.
Spain sold 6.6 billion euros of bonds maturing in 2016, 2019 and 2022 today, compared with a maximum target for the sale of 4.5 billion euros. The yields on the 2022 and 2019 securities declined, while the 2016 borrowing costs increased.
“Investors all heave a sigh of relief as the bond auctions are taking a successful course,” said Peter Braendle, who helps manage $60 billion at Swisscanto Asset Management AG in Zurich. “The market has developed rather pleasingly, despite France’s downgrade.”
European Central Bank Executive Board member Joerg Asmussen said the ECB has a range of further non-standard policy measures.
“There is a whole range of further unconventional measures by the ECB, for example the liquidity operations with full allotment and a duration of as much as three years that was decided in December,” he said on Deutschlandfunk radio today. All non-standard measures are “temporary by nature,” he added.
In the U.S., initial jobless-benefit claims plunged by 50,000 to 352,000 in the week ended Jan. 14, the lowest level since April 2008, Labor Department figures showed. The median forecast of 41 economists in a Bloomberg News survey had projected a reading of 384,000.
Bank of America Corp., the second-largest U.S. lender, swung to a fourth-quarter profit as the company sold assets and built capital faster than expected. EBay Inc., the largest Internet marketplace, reported sales and earnings that topped analysts’ estimates.
The Stoxx 600 became “overbought” for the first time in 14 months today, as the 14-day Relative Strength Index, which tracks momentum by comparing closing prices with daily trading ranges, rose to 70.47. When the RSI climbs above 70, technical analysts say the underlying security is likely to fall. The RSI last closed above 70 on Nov. 9, 2010.
Commerzbank surged 15 percent to 1.62 euros, the biggest jump since October. Germany’s second-largest lender said the measures it can take to boost capital or reduce the equivalent in risk-weighted assets by June 30 total 6.3 billion euros, outstripping the 5.3 billion euros required by the European Banking Authority.
A gauge of banks outperformed all 19 industry groups in the Stoxx 600, climbing 6.2 percent as Huw Van Steenis, an analyst at Morgan Stanley in London, said the market “still underestimates the potential impact of the European Central Bank’s support for banks to reduce systemic risk.”
BNP Paribas (BNP) SA jumped 8.2 percent to 34.70 euros while Deutsche Bank AG rallied 8.4 percent to 32.48 euros. Barclays Plc (BARC) gained 10 percent to 221.35 pence and UBS AG (UBSN), Switzerland’s biggest bank, gained 8.1 percent to 12.57 francs as Morgan Stanley named them all among its “most preferred” bank stocks.
Alstom jumped 14 percent to 28.15 euros, the biggest gain since 2008. The company said it has more than 1 billion euros of announced contracts yet to be booked in its fiscal year, which runs through March.
William Hill Plc (WMH) rallied 6.3 percent to 223 pence. The betting-shop owner said full-year performance is in line with analysts’ estimates, with revenue expected to increase 6 percent and operating profit of about 274 million pounds ($423 million).
Porsche SE rose 8.3 percent to 47.10 euros after Manager Magazin reported that the German sports-car maker offered to settle claims by U.S. investors tied to its failed takeover attempt for Volkswagen AG in 2008. Porsche made the offer dependent on the investors waiving possible new claims in the future, the magazine reported.
Swiss Re Chief
Swiss Re Ltd., the world’s second-biggest reinsurer, added 4.1 percent to 51.60 francs. The company said Michel Lies, the chairman of the reinsurer’s global partnerships, will succeed Stefan Lippe as chief executive officer in February.
The appointment “is somewhat unexpected, but keeps continuity and long standing reinsurance experience at the top position,” Stefan Schuermann, an analyst at Vontobel Holding AG, wrote in a note to clients today.
Carrefour retreated 1.1 percent to 17.27 euros after saying 2011 profit was at the lower end of its reduced forecast range after fourth-quarter sales declined.
AstraZeneca Plc (AZN), the U.K.’s second-largest drugmaker, slipped 1.3 percent to 3,070 pence after its experimental diabetes drug failed to win backing from U.S. regulators.
Remy Cointreau SA (RCO) fell 2 percent to 65.09 euros after France’s second-largest distiller forecast a slower rate of profit growth in the second half of the financial year.