By Peter Levring - Sep 20, 2011 6:51 PM GMT+0700
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A stockbroker monitors stock prices on his computer screens at Shore Capital Group Ltd. in London. Photographer: Simon Dawson/Bloomberg
Sept. 20 (Bloomberg) -- Ewen Cameron Watt, chief investment strategist at the BlackRock Investment Institute, talks about Standard & Poor’s downgrade of Italy’s credit rating, and gold and stocks. Cameron Watt speaks with Susan Li on Bloomberg Television's "First Up. (Source: Bloomberg)
European stocks climbed as Greece described its debt talks with the European Union and the International Monetary Fund as “productive” and investors speculated the Federal Reserve will provide more stimulus. U.S. futures rose, while Asian shares dropped.
SAP AG (SAP) gained 2.1 percent after a U.S. judge asked Oracle Corp. to consider revising its request for a review of a court order overturning a damage award against the German software maker. A gauge of technology companies gained 1.2 percent. EON AG and RWE AG (RWE) both climbed more than 3 percent after a court suspended a nuclear fuel tax.
The Stoxx Europe 600 Index rose 1.3 percent to 227.8 at 12:49 p.m. in London. The gauge slid as much as 0.6 percent in the first half hour of trading after Italy had its credit rating cut by Standard & Poor’s, fueling concern that Europe’s debt crisis was worsening. S&P 500 Index futures expiring in December rose 0.8 percent, while the MSCI Asia Pacific Index slipped 0.6 percent.
“The S&P move on Italy was expected and European shares have been underpriced versus U.S. stocks,” said Henrik Henriksen, chief investment strategist at PFA Pension A/S, which manages $45 billion, in Copenhagen. “Investors may be beginning to pick up equities ahead of a possible catch up with the S&P 500.”
The benchmark Stoxx 600 traded at 9.5 times the estimated earnings of its constituent companies, while the S&P 500 closed yesterday with a price-earnings ratio of 12.1 times projected earnings. The Stoxx 600 has fallen 22 percent from this year’s peak on Feb. 17 as the region’s mounting sovereign-debt crisis added to concern that the economic recovery is at risk.
‘Impressive Fiscal Consolidation’
Greece said Finance Minister Evangelos Venizelos held “productive” discussions with European officials yesterday about the country’s bailout. Prime Minister George Papandreou’s government will hold another call today as European leaders squabble over the terms of a July agreement and the prospect that they will be forced to channel more money to keep Greece in the currency union.
The IMF said that the program carried out by the government had produced “impressive fiscal consolidation,” while EU economics spokesman Amadeu Altafaj told reporters in Brussels yesterday that the European Commission has not demanded more of Greece than was agreed to in the international aid program for the country.
“The only thing that is on the table is full compliance with the agreed targets. No more, no less.”
Greek Lenders Gain
Italy had its credit rating cut to A from A+ by S&P on concern that weakening economic growth and a “fragile” government mean the nation won’t be able to reduce the euro area’s second-largest debt burden.
S&P said Italy’s net general government debt is the highest among A-rated sovereigns, and the company expects it to peak later and at a higher level than it had estimated.
Societe Generale (GLE) SA, which was downgraded by Moody’s on Sept. 14, sank 3.7 percent to 17.04 euros and BNP Paribas (BNP) SA declined 3.3 percent to 25.76 euros.
Federal Reserve officials tomorrow will probably announce a program for monetary easing that will do little to help 14 million unemployed Americans find work, according to economists in a Bloomberg News survey.
Federal Reserve Meeting
The Federal Open Market Committee will decide to replace short-term Treasuries in its $1.65 trillion portfolio with long- term bonds, according to 71 percent of 42 surveyed economists. The move, known as “Operation Twist” for its goal to bend the yield curve, will probably fail to reduce the 9.1 percent unemployment rate, 61 percent of the economists said.
German investor confidence fell less in September than analysts had estimated. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict developments six months in advance, declined to minus 43.3 from minus 37.6 in August. Economists had projected a drop to minus 45, according to the median of 37 estimates in a Bloomberg News survey.
SAP, the world’s biggest maker of business software, rose 2.1 percent to 37.27 euros. A U.S. federal judge asked Oracle Corp. to consider revising its request to seek a review of a court order overturning a $1.3 billion damage award against SAP.
SAP Shares Gain
U.S. District Judge Phyllis Hamilton in Oakland, California, on Sept. 1 granted SAP’s motion to throw out the copyright-infringement verdict against it. She ruled that SAP should get a new trial for damages if Oracle rejects her decision to reduce the amount to $272 million, which she said should be the maximum in damages based on the evidence at trial.
Alcatel-Lucent climbed 3.7 percent to 2.41 euros after UBS AG analysts, headed by Gareth Jenkins, said the French telecommunications equipment maker’s forecasts appeared “reasonable” and its details on cost savings “encouraging.”
Germany’s biggest utilities RWE and EON jumped 3.2 percent to 25.79 euros and 3.8 percent to 15.75 euros, respectively, as a Hamburg court suspended a federal tax on companies that use nuclear fuel. The court said that the government should reimburse an unnamed power plant operator, which asked that the tax be suspended, the 96 million euros ($131 million) it had paid on the levy.
NKT Holding A/S, the Danish maker of industrial vacuum cleaners and power cables, surged 9 percent to 208.40 kroner after saying it may sell its flexible pipeline joint venture with Norwegian offshore engineering group Subsea 7 SA. Subsea 7 rose 2.6 percent to 120 kroner.
Zodiac Aerospace (ZC) Soars
Zodiac Aerospace rallied 5.5 percent to 57.94 euros, the biggest gain on the Stoxx 600, after announcing that annual sales climbed 38 percent to 2.75 billion euros in the year ended August. The company confirmed its full-year current operating margin target of more than 13 percent. The company, which sells airplane equipment, said that 11 percent of the full-year sales growth came from recent acquisitions.
Deutsche Lufthansa AG (LHA), Europe’ second-biggest airline, declined 5.7 percent to 10.19 euros after saying operating profit in 2011 will fall short of last year’s 876 million euros. International Consolidated Airlines Group SA, the owner of British Airways and Spain’s Iberia, declined 2.1 percent to 150.9 pence, while Air France-KLM (AF) fell 3.3 percent to 5.76 euros.
To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
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