European Stocks Climb on U.S. Growth; CRH, Credit Agricole Gain

By Adam Haigh

Aug. 28 (Bloomberg) -- European stocks rose for a third day after the U.S. economy expanded more than previously estimated last quarter and Credit Agricole SA said a key measure of financial strength held steady.

CRH Plc surged 2.9 percent and Siemens AG advanced 1.8 percent, leading gains by companies with at least a fifth of their sales in the U.S. Credit Agricole, France's third-biggest bank, jumped 9.5 percent. UBS AG, the European bank hardest hit by the subprime contagion, climbed 4.6 percent, and Barclays Plc of the U.K. gained 4.5 percent.

The Dow Jones Stoxx 600 Index added 1.2 percent to 286.57 at 2:37 p.m. in London, trimming this year's decline to 21 percent. More than $13 trillion has been erased from global equity markets this year as credit-related losses and accelerating inflation threatened to push the U.S. into recession.

``The probability of a recession seems cast away,'' said Jacques Porta, who helps manage $180 million at Ofivalmo Patrimoine in Paris. The U.S. figures ``are good news. It's a good surprise,'' he said.

National benchmark indexes rose in all 18 western European markets. The U.K.'s FTSE 100 gained 1.1 percent, and Germany's DAX increased 1.2 percent. France's CAC 40 climbed 1.5 percent.

In the U.K., the prospect of a recession and tighter mortgage lending discouraged home buyers, sending house prices to the biggest annual decline in almost two decades in August, Nationwide Building Society, Britain's fourth-biggest mortgage lender, said today.

CRH, Siemens

CRH, the world's second-biggest maker and distributor of building materials, rallied 2.6 percent to 17.70 euros. Siemens, Europe's largest engineering company, climbed 1.9 percent to 74.72 euros.

The U.S. economy grew 3.3 percent in the second quarter, surpassing last month's estimate of 1.9 percent, the Commerce Department said.

The data shows ``a fairly resilient economy and some recovery towards the end of the year,'' said Felix Lanters, Amsterdam-based head of portfolio management at Theodor Gilissen Bankiers, which oversees $13 billion in assets. ``Anything that points towards a normalization of the environment probably helps the most distressed parts of the market,'' the financials.

Credit Agricole

Credit Agricole advanced 9.5 percent to 14.47 euros after saying its Tier 1 capital ratio held steady. The bank raised 5.9 billion euros last month and lifted the Tier 1 capital ratio to 8.9 percent as of June 30. It remained at that level at the end of the second quarter, the company said today.

``Investors are hanging onto the news about solvency, that's the good news,'' said Amandine Gerard, a fund manager at Richelieu Finance, which oversees $6.2 billion in Paris.

UBS, the biggest Swiss bank, climbed 4.6 percent to 345 francs. Barclays Plc, the U.K.'s third-largest bank, gained 4.5 percent to 345 pence.

The Stoxx 600 Banks Index has dropped 31 percent this year as the world's largest financial firms reported $507 billion in asset writedowns and credit losses and raised more than $353 billion to replenish capital.

Analysts estimate banks' earnings will decline 24 percent in 2008, according to data compiled by Bloomberg News.

``We would naturally be buying selectively into the financials as they have been beaten up,'' said Stephen Docherty, Glasgow-based head of global equities at Aberdeen Asset Management, which has $194 billion. He has an overweight position globally on banks.

MBIA

In the U.S., MBIA Inc., the largest bond insurer, agreed to reinsure $184 billion in municipal bonds for Financial Guaranty Insurance Co., signaling its ability to win new business after losing its top AAA rating.

Fannie Mae Chief Executive Officer Daniel Mudd replaced three top deputies in an effort to restore investor confidence after record losses and a 90 percent drop in the shares.

Natixis SA, the French bank seeking 3.7 billion euros in new capital, sank 4.8 percent to 5.42 euros as the bank reported a net loss of 1.02 billion euros in the second quarter, wider the 669 million-euro median loss estimate of nine analysts surveyed by Bloomberg.

Swiss Life Holding tumbled 8.9 percent to 204 francs. Switzerland's biggest life insurer will miss its 2008 profit target as impairments and investment losses cut first-half earnings, the company said. Profit from operations, which excludes a one-time gain from asset sales, plunged 63 percent to 227 million Swiss francs ($208 million) in the first half. The insurer booked net capital losses and impairments of 1.2 billion francs.

Ahold, Essilor

Royal Ahold NV slid 4.5 percent to 8.29 euros. The Dutch owner of the U.S. Stop & Shop chain reported second-quarter operating profit dropped 14 percent to 235 million euros ($347 million), less than the 260 million-euro estimate of eight analysts in a Bloomberg survey.

Essilor International SA climbed 9.2 percent to 36.26 euros. The world's largest maker of eyeglass lenses reported net income rose 9 percent to 198.3 million euros as it sold more of its products in emerging markets such as Brazil and Argentina. That beat the 192.2 million-euro median estimate of 14 analysts in a Bloomberg News survey. Essilor had reported profit of 181.7 million euros in the year-earlier period.

BT Group Plc climbed 3.9 percent to 171.7 pence. Goldman Sachs Group Inc. raised its recommendation on the U.K.'s largest phone company to ``buy'' from ``neutral,'' saying risks to the share price are now discounted into the price.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net