European Stocks Advance as Bank Concern Eases, Oil Declines

By Michael Patterson

Aug. 9 (Bloomberg) -- European stocks climbed for a third time in four weeks as oil dropped to a three-month low and earnings from Societe Generale SA and Royal Bank of Scotland Group Plc eased concern that banks need more capital.

Marks & Spencer Group Plc, Daimler AG and Air France-KLM rose after crude oil fell more than $7 a barrel. Societe Generale, France's second-largest bank, rallied the most in six months on a smaller-than-estimated profit decline. Royal Bank of Scotland, the second-biggest U.K. bank, rose 12 percent. European Aeronautic Defence & Space Co. gained the most in seven years as the euro fell to the lowest versus the dollar since February.

Europe's Dow Jones Stoxx 600 Index added 3.2 percent this week to 289.28, the highest level since June 30. The measure has climbed 8.5 percent from an almost three-year low on July 15 as crude tumbled more than 20 percent from a record and profits from Credit Suisse Group AG to Air France-KLM and Adidas AG beat analysts' estimates.

``Much of the market had been sold off aggressively ahead of first-half results and we were due a bounce,'' said Jane Coffey, head of equities at Royal London Asset Management, which oversees about $63 billion. ``A weakening oil price will allow central banks to be less concerned about inflation. This makes equities look more attractive.''

This week's rally pared the Stoxx 600's decline in 2008 to 21 percent. The benchmark index for European equities has dropped in eight of the previous nine months as asset writedowns and credit losses at banks approached $500 billion worldwide, threatening to prolong the slowdown in global economic growth.

National Markets

National benchmark indexes advanced in 15 of the 18 western European markets in the week. France's CAC 40 gained 4.1 percent. The U.K.'s FTSE 100 added 2.5 percent, while Germany's DAX climbed 2.6 percent.

Marks & Spencer, the U.K.'s largest clothing retailer, rallied 9 percent. Daimler, the world's second-biggest maker of luxury cars, increased 14 percent.

Crude oil tumbled this week as the dollar's gain against the euro reduced the appeal of commodities as an inflation hedge. Futures dipped to $115.61 a barrel on Aug. 8, a three-month low.

``The decline in oil was a critical factor,'' said Gregor Logan, the co-chief investment officer at New Star Asset Management in London, which oversees about $41 billion.

Air France, Europe's biggest airline, increased 13 percent. The carrier got an added boost this week after reporting first- quarter profit that exceeded analysts' projections.

Societe Generale

Societe Generale jumped 15 percent. The bank said net income fell 63 percent to 644 million euros ($1 billion), compared with the 550 million-euro median estimate of 13 analysts surveyed by Bloomberg. The company's capital position is ``completely solid,'' Chief Executive Officer Frederic Oudea said.

Royal Bank posted a smaller loss than analysts estimated and said the 5.9 billion pounds ($11.4 billion) of writedowns it announced in April may be sufficient for the year.

The European Central Bank, the Bank of England and the Federal Reserve left their benchmark interest rates on hold this week. Still, the euro headed for its biggest weekly loss against the dollar since January 2005 as oil tumbled and ECB President Jean-Claude Trichet said economic growth will be ``particularly weak'' through the third quarter.

A stronger dollar boosts the value of sales in the U.S. currency when converted into euros and pounds, which benefits companies including EADS and BAE Systems Plc.

Lonmin Surges

EADS, which controls planemaker Airbus SAS, climbed 23 percent and BAE, Europe's largest defense company, increased 3.3 percent.

Lonmin rallied 47 percent, the steepest gain in the Stoxx 600. Xstrata Plc made a 5 billion-pound ($9.8 billion) hostile bid for the world's third-biggest platinum company, which was rejected by Lonmin as ``wholly inadequate.'' Xstrata shares tumbled 13 percent.

Coloplast A/S slumped 20 percent, the steepest drop in the Stoxx 600 Index, after the world's largest maker of ostomy products cut its forecast for the fiscal year.

Basic-resources companies and oil producers were the worst performers among 18 industry groups in the Stoxx 600 as crude and metals prices declined. Copper on the London Metal Exchange slumped 6.2 percent, the sixth straight weekly drop. Nickel and zinc also retreated.

BHP Billiton Ltd., the world's biggest mining company, lost 5.9 percent. Anglo American Plc, the fourth-largest diversified mining company, decreased 3 percent. Total SA, Europe's third- biggest oil company, slipped 2.7 percent.

To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.