By Adam Haigh
Oct. 20 (Bloomberg) -- European stocks rose after Ericsson AB reported better-than-estimated earnings, higher oil boosted energy shares and the Netherlands stepped up efforts to ease the financial crisis.
The Dow Jones Stoxx 600 Index extended its biggest weekly gain since March 2007, rising 3 percent as all 18 western European markets advanced except Greece. Ericsson, the world's largest maker of wireless phone networks, jumped 17 percent, the most in six years. ING Groep NV rallied 27 percent after receiving a 10 billion-euro ($13.4 billion) lifeline from the Dutch government. Money-market rates declined.
``We have probably seen the bottom of the market,'' said Christian Dargnat, chief investment officer of BNP Paribas Asset Management, who helps oversee about $446 billion in Paris. ``The authorities have taken the right steps. The measures are going in a good direction to solve the problems of liquidity and solvency.''
The U.K.'s FTSE 100 added 3.6 percent as of 3:02 p.m. in London, and France's CAC 40 advanced 2.8 percent as Royal Dutch Shell Plc and Total SA both gained more than 7 percent following crude's second straight daily advance. Germany's DAX Index rose 1.2 percent.
Prudential Plc climbed 15 percent on a report the U.K.'s second-biggest insurer is in advanced talks to sell a stake.
The Standard & Poor's 500 Index advanced 2.5 percent as Halliburton Co.'s better-than-estimated profit boosted the earnings outlook for energy companies.
Stocks extended gains after the index of U.S. leading economic indicators unexpectedly rose in September and Federal Reserve Chairman Ben S. Bernanke endorsed consideration of a fiscal stimulus package.
The MSCI Asia Pacific Index rose 3.7 percent after South Korea's government guaranteed $100 billion of lenders' foreign- currency debts and provided $30 billion to banks.
$30 Trillion Erased
About $30 trillion has been erased from the value of global equities since October 2007 as credit-related losses and asset writedowns topped $661 billion in the worst financial crisis since the Great Depression. The Stoxx 600, which slumped 40 percent this year, rebounded 4.5 percent last week after governments injected $2 trillion to bail out banks and help restore investor confidence.
The London interbank offered rate, or Libor, for three-month loans in dollars dropped to 4.06 percent from 4.42 percent, the British Bankers' Association said. That is the steepest drop since Jan. 23. It declined 40 basis points last week.
The euro interbank offered rate, or euribor, for three- month loans fell for a seventh day, dropping 5 basis points to 5 percent, according to the European Banking Federation. Hong Kong's three-month interbank rate tumbled the most in 10 years, by 53 basis points, to 3.66 percent, after the city's Monetary Authority injected HK$4 billion ($515 million).
`Path to Normalization'
European Central Bank President Jean-Claude Trichet said banks should start lending again after policy makers put them on ``the path'' of recovery.
``I expect the banks to normalize their relationships, meaning that they start lending to each other and that they lend to their clients,'' Trichet said in an interview on French radio RTL late yesterday. The banking system is ``on the path to normalization,'' he said.
Ericsson surged 17 percent to 58.50 kronor after reporting third-quarter net income of 2.8 billion Swedish kronor ($380 million) which beat the 2.34 billion-kronor estimate of analysts surveyed by Bloomberg. Citigroup Inc. reiterated its ``buy'' recommendation on the shares with a price estimate of 68 kronor after the report.
``It was a great surprise,'' said Mauritz Redin, Stockholm- based head of Swedish equities at Alfred Berg AB, which manages $27 billion in Nordic stocks, including Ericsson shares. ``Expectations were very low ahead of the report.''
Bond Risk
Ericsson's earnings come as the cost of protecting European corporate bonds from default rose to a record on concern the economic slump will deepen.
``The real deterioration in the economy is only just beginning,'' said Jim Reid, head of fundamental credit strategy at Deutsche Bank AG in London. The focus will now be on how earnings hold up, he said.
Analysts have cut profit forecasts this year as the credit turmoil spread, threatening economic growth. Earnings for companies in the Stoxx 600 will decline 4.4 percent in 2008, down from 11 percent growth predicted the start of the year, according to estimates compiled by Bloomberg. Before Lehman Brothers Holdings Inc.'s collapse last month deepened the freeze in credit markets, analysts expected profit would decline 2.2 percent this year, the data show.
The Stoxx 600 was valued at 8.9 times earnings of companies at the close of last week, near the cheapest on record. The MSCI World Index traded at 11.6 times the earnings of its 1,730 companies, and the S&P 500 was valued at 18.5 times profit, near the lowest in more than a year.
`Breathing Space'
ING jumped 22 percent to 8.97 euros. The Dutch government will buy non-voting preferred shares in the financial and insurance company and appoint two representatives to the board of ING, which will scrap this year's final dividend. ING fell a record 27 percent on Oct. 17 after predicting a 500 million-euro loss for the third quarter.
``It shows the Dutch government is ready to inject some confidence and this gives it some breathing space,'' said Matt Buckland, a trader at CMC Markets in London.
Shell, Europe's largest oil producer, added 9.2 percent to 19.645 euros, while Total, the region's third-biggest, gained 7.8 percent to 39.29 euros.
Crude oil rose in New York on speculation OPEC will lower output in an attempt to halt a slide in prices, which have fallen more than 50 percent from July's record.
Prudential, SocGen
Prudential rose 15 percent to 311 pence after the Sunday Times reported the insurer is in advanced talks with investment funds in China and the Middle East to take a 20 percent stake in and help finance a $15 billion offer for the Asian business of American International Group Inc. The newspaper did not say where it got the information.
Prudential spokesman Jon Bunn declined to comment yesterday.
Societe Generale SA slumped 7.2 percent to 42.06 euros on speculation France's second-biggest bank may have to raise new capital. Spokeswoman Stephanie Carson-Parker was not immediately available for comment.
``Rumors of a capital increase persist,'' Yann Azuelos, a fund manager at Meeschaert Asset Management in Paris, said in a phone interview today.
European banks led by Deutsche Bank and UniCredit SpA may need to raise a combined 73 billion euros, Merrill Lynch & Co. analysts said in a note today. Societe Generale may have to raise 6.5 billion euros, the analysts said.
Iberia, Veolia
Iberia Lineas Aereas de Espana SA, which plans to merge with British Airways Plc, soared by a record 21 percent to 1.70 euros after Spanish newswire Efe said the U.K. carrier's pension deficit won't harm negotiations.
Veolia Environnement SA tumbled 21 percent to 18.24 euros after the world's biggest water company said its water and waste management businesses have slowed, and that it is expects total investments to fall 34 percent to 4 billion euros ($5.4 billion) this year.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
Posts
No comments:
Post a Comment