European Stocks Advance; U.S. Index Futures Are Little Changed

By Sarah Thompson

Aug. 22 (Bloomberg) -- European stocks rose, led by banks and construction companies, as investors speculated declines this week were overdone and reports signaled takeovers may increase. U.S. index futures were little changed, while Asian shares retreated.

UBS AG gained 2.2 percent, and HBOS Plc increased 2.7 percent. Hochtief AG increased 11 percent after Manager Magazin said Germany's biggest builder may be broken up. SSL International Plc climbed 6.1 percent after Goldman Sachs Group Inc. recommended buying shares in the maker of Durex condoms and Scholl shoes on speculation it may be a takeover target.

Europe's Dow Jones Stoxx 600 Index added 0.5 percent to 279.9 at 9:11 a.m. in London, trimming this week's decline to 2.6 percent. Futures on the Standard & Poor's 500 Index added less than 0.1 percent, while the MSCI Asia Pacific Index fell 0.5 percent.

``This is a technical rebound after a difficult week,'' said Clemence Bounaix, an analyst at Richelieu Finance in Paris, which oversees $6.2 billion. ``Today, we expect a very mixed trading session. There are still worries about the oil price.''

European stocks are set for their worst week in more than a month, as concern spread that banks will post more losses and reports signaled faster-than-forecast inflation in the U.S. and Germany, Europe's biggest economy.

Oil is poised for its biggest weekly rally since June 6 as the dollar slumped and a missile-shield agreement between the U.S. and Poland heightened concern Russia may disrupt the flow of oil.

National Markets

National benchmark indexes rose in 15 of the 17 western European markets that were open. Germany's DAX added 0.2 percent and France's CAC 40 climbed 0.5 percent. The U.K.'s FTSE 100 gained 0.4 percent.

UBS, the largest Swiss bank, gained 2.2 percent to 22.3 francs. HBOS, the U.K.'s biggest mortgage bank, increased 2.8 percent to 279.25 pence.

The Stoxx 600 Banks Index, the worst performer among the region's 18 industries this year, closed yesterday at the lowest in a month and traded at its cheapest relative to earnings in two weeks. The index has dropped 6.2 percent this week, headed for its worst week in seven months.

More than $13 trillion has been erased from equity markets worldwide in 2008 as accelerating inflation, record oil and $505 billion in writedowns and credit-related losses threaten economic growth.

Yesterday, crude for October delivery surged $5.62, or 4.9 percent, to settle at $121.18 a barrel, the biggest increase since June 6. Futures are down 18 percent from a record $147.27 reached on July 11.

Hochtief, SSL

Hochtief climbed 11 percent to 55.46 euros. Germany's biggest builder may be broken up by its main investors, Spanish construction company ACS SA and Russian billionaire Oleg Deripaska, Manager Magazin reported, without saying where it got the information.

``We don't have any indication that ACS has plans to break up Hochtief,'' Hochtief spokeswoman Jutta Hobbiebrunken said in a telephone interview with Bloomberg News.

SSL International gained 6.1 percent to 464.75 pence after Goldman Sachs added the stock to its ``conviction buy'' list.

``The group could prove an attractive bolt-on deal for a larger group seeking to increase exposure to branded consumer health products,'' London-based analyst Robert Waldschmidt wrote in a note dated yesterday. In addition, a trading update scheduled for Oct. 16 ``could lead to upward revisions to consensus estimates.''

Arriva, Dragon Oil

Arriva Plc added 5.4 percent to 751.5 pence. The operator of the U.K.'s longest train route said first-half profit jumped 32 percent as the company added buses, won a rail-route franchise and attracted travelers switching to public transit as gasoline prices rose.

Dragon Oil Plc jumped 6.7 percent to 333 pence after the Dubai-based petroleum producer with operations in Turkmenistan said first-half profit gained 34 percent as crude prices rose to a record.

BHP Billiton Ltd., the world's largest mining company, dropped 1.1 percent to 1,652 pence, Rio Tinto Group, the third- biggest, slipped 2.2 percent to 5,029 pence.

The Australian Competition and Consumer Commission is seeking more information about BHP Billiton's $142 billion hostile takeover bid for Rio Tinto.

The competition regulator seeks ``further information on certain competition issues which have arisen from the ACCC's market enquiries to date,'' the commission said in a statement to the Australian stock exchange.

SSAB Svenskt Staal AB gained 1 percent to 149 kronor. The world's largest supplier of high-tensile steel said it will invest 5.3 billion kronor ($843 million) to boost the production of quenched and tempered steels in Sweden and the U.S.

Rentokil Initial Plc tumbled 8.1 percent to 67.75 pence. The world's biggest pest-control provider reported a 68 percent plunge in second-quarter profit and said it will take up to five years to turn around sliding earnings.

To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net