European Stocks Gain for First Time in Three Days; Tesco Rises

By Adria Cimino

June 16 (Bloomberg) -- European stocks advanced after German investor confidence rose to the highest in three years, adding to evidence that the worst of the recession is over.

Tesco Plc led retailers higher after reporting first- quarter sales growth that matched analyst estimates. BT Group Plc climbed 4.6 percent after Morgan Stanley recommended the U.K.’s largest phone company. National Bank of Greece SA sank the most in seven months after announcing plans for a 1.25 billion-euro ($1.7 billion) rights offer.

Europe’s Dow Jones Stoxx 600 Index added 0.5 percent to 210 at 12:11 p.m. in London. The gauge has surged 33 percent since March 9 on speculation the $12.8 trillion pledged by the U.S. government and Federal Reserve will end the deepest global economic contraction since the Great Depression.

“The confidence indicators have been positive,” said Gregoire Scheiff, a fund manager at DNCA Finance in Paris, which oversees $5.3 billion. “The market can continue to gain. Now we need to see more data on investment.”

The ZEW Center for European Economic Research in Mannheim said its index of German investor and analyst expectations, which aims to predict economic developments six months ahead, increased to 44.8 this month from 31.1 in May, the highest since May 2006. Economists had expected a reading of 35, according to the median of 35 forecasts in a Bloomberg News survey.

Expensive Level

The rally has left the Stoxx 600 trading at 25.4 times earnings, the most expensive level since March 2004, weekly data compiled by Bloomberg show.

“Investors expected some sort of consolidation,” Philipp Baertschi, global chief strategist at Bank Sarasin & Cie. in Zurich, said in Bloomberg Television interview. “The improvement in sentiment has been so dramatic.”

Standard & Poor’s 500 Index futures added 0.3 percent before a Federal Reserve report at 9:15 a.m. Washington time that may show industrial production in the U.S. fell 1 percent in May. Other reports may show builders began work on more houses in May and wholesale prices rose.

The MSCI Asia Pacific Index sank 1.6 percent as lower commodity prices dragged down raw-material and oil producers.

Tesco added 2 percent to 363.2 pence after reporting first- quarter sales growth that matched analyst estimates as its U.K. supermarkets retained shoppers in the recession and international expansion boosted revenue. The world’s third- biggest retailer led a gauge of retail shares 1.3 percent higher, for the biggest gain among 19 industry groups in the Stoxx 600.

Carrefour, Delhaize

Carrefour SA, the second-largest retailer, added 2.2 percent to 29.37 euros. Delhaize Group, the Belgian owner of the Food Lion supermarket chain in the U.S., increased 2.9 percent to 48.57 euros.

BT advanced 4.6 percent to 99.3 pence. Morgan Stanley lifted its recommendation on the shares to “overweight” from “equal weight.”

National Bank of Greece slumped 10 percent to 18.41 euros, the biggest intraday decline since Nov. 11. The country’s biggest bank plans to offer shareholders two new shares for each nine held at 11.30 euros apiece. EFG Eurobank Ergasias SA, Greece’s second-largest lender, dropped 8.1 percent to 8 euros.

TUI AG plummeted 12 percent to 5.38 euros. The German owner of Europe’s largest travel company was rated “sell” in resumed coverage at Deutsche Bank AG, which cited the company’s exposure to container shipping trends.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.