European Stocks Snap Two-Week Drop; Credit Agricole, CRH Climb

By Henrietta Rumberger

Aug. 30 (Bloomberg) -- European stocks climbed for the first time in three weeks after a government report showed the U.S. economy expanded more than previously estimated last quarter and concern eased that banks need more capital.

CRH Plc, the world's second-biggest distributor of building materials, paced an advance among companies that depend on sales in North America. Credit Agricole SA led banks higher after reporting that a measure of financial strength held steady. Royal BAM Groep NV, the largest Dutch construction company, rallied 13 percent after posting second-quarter earnings that beat analysts' estimates and raising its profit forecast.

Europe's Dow Jones Stoxx 600 Index added 1.5 percent to 288.18, bringing the gain in August to 1.6 percent. The measure is still down 21 percent this year after asset writedowns and credit losses at banks topped $500 billion worldwide, threatening to push the U.S. economy into recession.


``Investors seem to be relieved that the worst-case scenario for the U.S. economy so far hasn't come true,'' said Carsten Klude, an investment strategist at M.M. Warburg & Co. in Hamburg, which oversees the equivalent of $25 billion. ``The GDP data triggered a stocks rally.''

National benchmark indexes advanced in all 18 western European markets, except Greece and Iceland. France's CAC 40 gained 1.9 percent. The U.K.'s FTSE 100 added 2.4 percent, while Germany's DAX climbed 1.3 percent.

Economic Growth

The U.S. economy grew at a 3.3 percent annual rate in the second quarter, surpassing last month's estimate of 1.9 percent, the Commerce Department said Aug. 28. Record exports and a smaller decline in inventories helped boost growth. Economists had predicted a 2.7 percent rate, according to the median estimate in a Bloomberg News survey.

``The U.S. data supported the market, implying that the world's largest economy may not fall into as deep a recession as some investors feared,'' Thomas Koerfgen, a money manager at SEB Asset Management in Frankfurt, said in a Bloomberg Television interview.

Gains in the Stoxx 600 were limited by carmakers including Renault SA and Bayerische Motoren Werke AG as crude climbed above $117 a barrel. Oil producers evacuated rigs before the arrival of Gustav, forecast to be the largest hurricane in the Gulf of Mexico since Katrina.

CRH increased 4.6 percent. The company gets about 49 percent of its revenue in the Americas, according to Bloomberg data.

Farm Profits

Syngenta AG rose 3.7 percent. The world's largest maker of agricultural chemicals generates 34 percent of its sales in the North American Free Trade Agreement zone, Bloomberg data shows. K+S AG, Europe's biggest producer of potash used in fertilizers, rallied 7.8 percent.

The U.S. Department of Agriculture said farm profits in 2008 will be the highest ever on record corn, wheat and soybean prices. Higher grain prices tend to prompt farmers to increase spending on crop protection. Pesticides, fungicides, herbicides and other chemicals account for about 80 percent of Syngenta's annual revenue.

Credit Agricole advanced 7 percent. France's third-biggest bank, which raised 5.9 billion euros ($8.7 billion) last month, said it's ``financially well-armed'' after lifting its Tier 1 capital ratio above its target at the end of the quarter.

Barclays Plc, the U.K.'s third-largest bank, climbed 8 percent. UBS AG, the European bank hardest hit by the U.S. subprime mortgage contagion, added 5.6 percent.

Worst Performers

The Stoxx 600 Banks Index is down 30 percent this year, the worst performance among 18 industry groups, as financial firms worldwide 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.

BAM climbed 13 percent. Second-quarter profit increased 14 percent to 79.4 million euros, exceeding the average estimate of 64.8 million euros in a Bloomberg survey. BAM also lifted its full-year profit forecast 4 percent to at least 260 million euros as governments in the U.K. and the Netherlands increase spending on schools and hospitals.

Kingspan Plc gained 6.9 percent. Europe's largest maker of flooring and insulation panels reported first-half profit and sales on Aug. 27 that beat projections and analysts said full- year earnings may decline less than predicted.

Taylor Wimpey Plc, the U.K.'s biggest homebuilder, jumped 19 percent as Building magazine reported that lenders have agreed to relax loan conditions without requiring the company to raise new capital first.

Swiss Life Holding plunged 12 percent, the steepest decline in the Stoxx 600. Switzerland's largest life insurer said Aug. 28 it will miss 2008 profit targets and reiterated its interest in Germany's MLP AG.

Renault, France's second-biggest carmaker, lost 3.2 percent. BMW, the world's largest luxury carmaker, retreated 2.2 percent. Carmakers were the only industry group in the Stoxx 600 to decline, dropping 1.2 percent as crude oil headed for its biggest weekly gain in almost two months.

To contact the reporter on this story: Henrietta Rumberger in Frankfurt at hrumberger@bloomberg.net.