By Adria Cimino - Oct 6, 2011 8:20 PM GMT+0700
European stocks rose for a second day amid speculation policy makers will reach agreement to contain the sovereign-debt crisis and as the Bank of England expanded its bond-purchase program.
BNP Paribas (BNP) SA, Credit Agricole SA (ACA) and Natixis surged after Le Figaro said the French government is working on a contingency plan to take stakes in the country’s lenders. BHP Billiton Ltd. (BHP), the world’s biggest mining company, rallied 4.1 percent as metal prices increased. SABMiller Plc (SAB) surged 6.2 percent after a report the brewer is in talks to be bought by Anheuser-Busch InBev NV. (ABI)
The Stoxx Europe 600 Index climbed 0.8 percent to 226.03 at 2:18 p.m. in London. The benchmark gauge gained 3.1 percent yesterday as investors speculated that euro-area policy makers are working on plans to boost bank capital. The gauge had declined 5 percent in the previous three days, leaving it trading at 9.1 times estimated earnings, near the cheapest since March 2009, data compiled by Bloomberg show.
“The market optimism may be explained by new initiatives that have emerged as part of efforts to quell both the sovereign debt and the banking crises,” said Stephane Ekolo, chief European strategist at Market Securities in London. “The bond- purchase announcement was a good move by the Bank of England as the economy still faces downside risks stemming from the sovereign-debt crisis.”
Bank Recapitalization Plans
Stocks extended gains today as European Commission President Jose Barroso said in a video question-and-answer session that the commission is proposing coordinated action to recapitalize banks.
German Chancellor Angela Merkel said that the euro area will only use its rescue fund as a last resort to save banks and that investors may have to take deeper losses as part of a Greek rescue. Merkel’s comments, her most explicit on banks’ role in fighting the debt crisis since the spillover from Greece began to threaten France and Italy, followed talks with Barroso in Brussels.
European banks need the region’s regulators to help with financing to prevent the debt crisis from worsening, said UniCredit SpA Chief Executive Officer Federico Ghizzoni in an interview.
BOE Asset Purchases
The Bank of England expanded its bond-purchase plan as government budget cuts and Europe’s debt crisis jeopardize Britain’s economic recovery. The nine-member Monetary Policy Committee raised the ceiling for so-called quantitative easing to 275 billion pounds ($421 billion) from 200 billion pounds. Only 11 of 32 economists in a Bloomberg News survey had forecast an increase in asset purchases.
European stocks pared gains after European Central Bank President Jean-Claude Trichet said the euro-area economy faces “intensified downside risks.” The ECB kept its benchmark rate unchanged at 1.5 percent, as predicted by 41 of 52 economists in a Bloomberg News survey.
In the U.S., a report showed that claims for unemployment benefits rose less than forecast last week to a level that shows companies may be starting to slow the pace of dismissals.
Applications for jobless benefits increased by 6,000 in the week ended Oct. 1 to 401,000, Labor Department figures showed today. Economists had predicted 410,000 claims, according to the median estimate in a Bloomberg News survey.
Credit Agricole climbed 2.8 percent to 5.31 euros, while BNP advanced 6.5 percent to 31.41 euros. Shares of Natixis surged 11 percent to 2.56 euros.
France’s state-holding agency is working on a plan, involving two or three unnamed banks, Le Figaro said, citing a person familiar with the matter that it didn’t identify. A French government official, who declined to be named because he’s not authorized to speak to the press, rejected the report, calling it false.
Basic-resources shares jumped 4 percent, for the best performance of the 19 industry groups in the Stoxx 600. BHP gained 4.1 percent to 1,851.5 pence. Rio Tinto Group, the world’s second-largest mining company, increased 5.9 percent to 3,075.5 pence. Copper, lead, nickel and tin rose in London.
SABMiller, AB InBev
SABMiller, the maker of Peroni and Grolsch beer, soared 6.2 percent to 2,230 pence, its biggest gain since May 2010. Brazilian news website IG reported that AB InBev, the world’s largest brewer, has held talks to acquire the company for about $80 billion. AB InBev slipped 1.4 percent to 39.07 euros.
Nigel Fairbrass, a spokesman for London-based SABMiller, and Marianne Amssoms, a spokeswoman for Leuven, Belgium-based AB InBev, declined to comment on the report.
Atos SA rose 4.7 percent to 33.55 euros. Chief Executive Officer Thierry Breton confirmed the French computer-services company’s targets for 2011 and 2013 in an interview with French newspaper Les Echos. The company will be debt free by June 30, 2012, Breton said.
UBS AG (UBSN) gained 2.5 percent to 10.76 Swiss francs after Switzerland’s biggest bank said Francois Gouws and Yassine Bouhara resigned as co-heads of global equities following last month’s $2.3 billion loss from unauthorized trading.
Eurofins Scientific (ERF) SA surged 9 percent to 58.97 euros. The company predicted that adjusted earnings before interest, taxes, depreciation and amortization of as much as 145 million euros ($192 million) in 2011.
Hays Plc (HAS), the London-based recruiting company, rallied 5.9 percent to 71.6 pence. The company said net fees rose 21 percent in the quarter ended September 30.
Dexia Shares Tumble
Dexia SA (DEXB) sank 15 percent to 87.1 euro cents for the largest plunge on the Stoxx 600 after Luxembourg’s Finance Minister, Luc Frieden, said an international investor is ready to take over Dexia Banque Internationale a Luxembourg SA.
Qatari Investment Authority, the country’s sovereign-wealth fund, may be part of a group of international investors looking to buy the Luxembourg banking unit of Dexia, Les Echos reported, without saying where it got the information.
Belgium will nationalize Dexia Bank Belgium NV pending a sale, De Tijd reported on its website, citing unnamed sources. Dexia needs to sell its Belgian banking unit to free capital for its so-called bad bank, according to De Tijd.
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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