By Adria Cimino - Oct 10, 2011 6:27 PM GMT+0700
European stocks advanced, extending a two-week gain for the Stoxx Europe 600 Index, as energy companies rallied after the leaders of Germany and France gave themselves three weeks to create a plan to recapitalize banks. U.S. index futures and Asian shares rose.
A gauge of energy companies was among the best performers in the Stoxx 600 after HSBC Holdings Plc upgraded Premier Oil Plc. (PMO) BP Plc contributed the most to the gauge’s advance. Erste Group Bank AG (EBS) plunged 13 percent after saying it will post a full-year loss because of writedowns at its units in Hungary and Romania. Dexia SA (DEXB) may be active when trading in the shares resumes after Belgium stepped in to shore up the company.
The benchmark Stoxx 600 advanced 0.7 percent to 233.59 at 12:25 p.m. in London. Futures on the Standard & Poor’s 500 Index expiring in December climbed 1.4 percent, while the MSCI Asia Pacific Index added 0.6 percent.
“I believe they will come up with something,” Andy Brough, executive director at Schroder Investment Management Ltd. in London, which has about $324 billion in assets under management, said in a Bloomberg Television interview. “What the market wants to see is can we get a position and move forward.”
Angela Merkel and Nicolas Sarkozy, racing to stamp out the sovereign-debt crisis that threatens to engulf the financial system, set an end-of-October deadline to devise a plan to recapitalize banks, get Greece on the right track and fix Europe’s economic governance.
Recapitalizing Lenders
“By the end of the month, we will have responded to the crisis issue and to the vision issue,” France’s president said in Berlin yesterday at a joint briefing with the German chancellor before they dined at her office. Sarkozy said they will deliver a plan by the Nov. 3 Group of 20 summit.
The Stoxx 600 advanced 2.6 percent last week as the Bank of England expanded its bond-purchase program and after Merkel said she’s ready to discuss recapitalizing lenders. The gauge has still retreated 20 percent since this year’s high on Feb. 17 and is trading at 9.8 times its companies’ estimated earnings, near the cheapest since March 2009, according to data compiled by Bloomberg.
Energy stocks jumped 1.9 percent, for the second-best performance among the 19 industry groups in the Stoxx 600. BP added 2.3 percent to 402.7 pence.
Premier Oil gained 2.9 percent to 371.1 pence. HSBC lifted its recommendation on the stock to “overweight” from “underweight.”
Ferrovial Shares Surge
Ferrovial SA (FER) gained 4.7 percent to 8.92 euros. The company agreed to sell 5.9 percent of BAA’s parent company, FGP Topco Ltd. to two of Alinda Capital Partners’ funds, reducing its indirect holding in the owner of London’s Heathrow airport to 49.99 percent.
Maurel SA rallied 4.1 percent to 13.24 euros. The company said it has found oil sandstones at a well at the Sabanero license in Colombia and oil samples taken have confirmed the field extension to the north east. In a statement, Maurel said it will drill three more wells in 2011 and 2012.
ABB Ltd. (ABBN), the world’s largest maker of power-transmission gear, added 2.2 percent to 16.78 francs. Jefferies Group Inc., raised its recommendation on the company’s shares to “buy” from “hold.”
Erste Group, eastern Europe’s second-biggest lender, slumped 13 percent to 18.01 euros, its largest slump since May 2009. The bank said it will post a full-year loss of as much as 800 million euros ($1.1 billion) after writedowns on its Hungarian and Romanian units.
Raiffeisen Bank International AG (RBI), eastern Europe’s third- biggest lender, plunged 6.8 percent to 20.73 euros.
Dexia May Move
Dexia may be active when it resumes trading this afternoon after being suspended on Oct. 6. The Belgian federal government will pay 4 billion euros for the local unit and guarantee 60 percent of a so-called bad bank to be set up for Dexia’s troubled assets, Finance Minister Didier Reynders said. The sale will cut Dexia’s short-term funding requirement by more than 14 billion euros, the French-Belgian bank said.
The dismantling of Dexia, once the world’s leading lender to municipalities, became inevitable after concern over European sovereign-debt holdings caused its short-term funding to evaporate.
Konecranes Oyj (KCR1V) sank 4.7 percent to 14.58 euros. The company cut its forecast for full-year operating profit, excluding restructuring costs, saying it will be flat compared with last year. The company had predicted an increase in operating profit this year.
CSM (CSM) NV slumped 19 percent to 11.39 euros after the company said that it will fall short of its 2011 forecasts. CSM also said it plans a restructuring program of about 50 million euros.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
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