European Stocks Climb on Debt-Crisis Deal

By Adria Cimino - Oct 27, 2011 5:21 PM GMT+0700

European stocks rallied to the highest in 12 weeks after the region’s leaders agreed to expand a bailout plan to halt the sovereign debt crisis. Asian shares and U.S. index futures also climbed.

BNP Paribas SA, France’s biggest bank, and Deutsche Bank AG, Germany’s largest, surged more than 14 percent as policy makers boosted the firepower of the European rescue fund to 1 trillion euros ($1.4 trillion). PPR SA, the French owner of the Gucci luxury-goods brand, jumped 5.8 percent after third-quarter sales surpassed analyst estimates. Royal Dutch Shell Plc climbed after saying third-quarter earnings doubled.

The Stoxx Europe 600 Index surged 2.8 percent to 247.43 at 11:00 a.m. in London, the highest since Aug. 4. The index has rallied 15 percent from this year’s low on Sept. 22 amid growing speculation that policy makers would agree on a solution to the region’s debt woes.

“Some of the fear, which has been the dominant factor in the market, has been removed,” said Pierre Mouton, a fund manager who helps oversee $7.5 billion at Notz Stucki & Cie. in Geneva. “Europe came to an agreement and has a plan. This allows financial stocks to rise because there is no longer the specter of nationalization. There is a sense of relief for the banking sector.”

Futures on the Standard & Poor’s 500 Index jumped 2 percent, before the release of U.S. gross domestic product data. The MSCI Asia Pacific Index surged 3.1 percent.

Crisis Summit

European leaders yesterday persuaded bondholders to take 50 percent losses on Greek debt and boosted the firepower of the rescue fund, responding to global pressure to step up the fight against the financial crisis.

Ten hours of brinkmanship at the second crisis summit in four days delivered a plan that the euro area’s stewards said points the way out of the debt quagmire, even if key details are lacking. Last-ditch talks with bank representatives led to the debt-relief accord, in an effort to quarantine Greece and prevent speculation against Italy and France from ravaging the euro area and wreaking global economic havoc.

Measures include recapitalization of European banks, a potentially bigger role for the International Monetary Fund, a commitment from Italy to do more to reduce its debt and a signal from leaders that the European Central Bank will maintain bond purchases in the secondary market.

“A lot of details are still to come out,” Ralph J. Silva Jr., a strategist at Silva Research Network in London, said on Bloomberg Television. “The overall perception I have is that it’s positive. It’s a very good start.”

U.S. Growth

The U.S. economy probably grew in the third quarter at the fastest pace this year as gains in consumer spending and business investment helped sustain a recovery on the brink of faltering, economists said before a report today. GDP rose at a 2.5 percent annual pace after advancing 1.3 percent in the previous three months, according to a Bloomberg survey of economists.

A gauge of banks in the Stoxx 600 index rose 6.3 percent, for the biggest increase among the 19 industry groups in the measure. BNP climbed 14 percent to 34.24 euros. Deutsche Bank advanced 15 percent to 32.61 euros.

Societe Generale SA, France’s second-largest bank, jumped 13 percent to 21.20 euros. The bank said in a statement today that it will meet mid-2012 capital requirements “through its own means.”

Greek Plan

Greece’s ASE Index jumped 5.9 percent, led by banks. National Bank of Greece SA, the country’s biggest lender, surged 13 percent to 2.04 euros. Alpha Bank SA soared 15 percent to 1.20 euros. EFG Eurobank Ergasias increased 10 percent to 78 euro cents.

Greek Prime Minister George Papandreou said the government may buy shares in some Greek banks as a result of the planned writedown of the country’s debt and the European accord to recapitalize lenders. Papandreou didn’t give any details on the banks that would be targeted in any nationalization program or the size of any potential shareholdings.

The Stoxx 600 is trading at 10.6 times the estimated earnings of its companies, compared with the two-year low of 9.1 reached on Sept. 23, according to data compiled by Bloomberg. About half of the 108 companies in the Stoxx 600 that have released earnings since Oct. 11 missed analyst profit estimates.

PPR, BASF

PPR advanced 5.8 percent to 116.85 euros. The company reported third-quarter sales that beat analysts’ estimates and said it expects to report an improved full-year financial performance. Revenue from continuing operations climbed 8 percent to 3.86 billion euros. The average of four analysts’ estimates compiled by Bloomberg was 3.79 billion euros.

BASF SE, the world’s largest chemicals maker, rose 4.7 percent to 52.96 euros. The company reported third-quarter profit that beat analyst estimates as price increases and the purchase of cosmetic-ingredient maker Cognis helped limit a drop in margins.

Earnings before interest, tax and items such as costs from acquisitions and restructuring fell 11 percent to 1.96 billion euros, the company said. Analysts had predicted 1.85 billion euros, according to the average of 16 estimates in a Bloomberg survey.

Shell Gains

Shell climbed 1.4 percent to 2,284.5 pence. Europe’s biggest oil company said third-quarter earnings doubled as energy prices rose and it ramped up projects from Qatar to Canada. Net income rose to $7 billion from $3.46 billion a year earlier, the company said. Excluding one-time items and inventory changes, profit beat analyst estimates.

BHP Billiton Ltd., the world’s biggest mining company, gained 5.6 percent to 2,078 pence. Copper, lead, nickel and tin prices advanced in London.

Michelin & Cie. jumped 4.7 percent to 54.75 euros. The world’s second-largest tiremaker said third-quarter revenue rose 11 percent to 5.14 billion euros, spurred by a rebound in demand from U.S. automakers and strong sales of its winter tires in Europe.

Michelin reiterated that sales should increase 8 percent during the full year. While free cash flow will be “temporarily negative” because of higher raw-material costs, operating profit should be “substantially higher,” it added.

Daimler AG added 2.4 percent to 38.81 euros. The world’s third-largest maker of luxury vehicles advanced after predicting higher fourth-quarter profit on gains at its trucks and vans divisions.

Logitech International SA, the world’s largest maker of computer mice, rallied 15 percent to 8.88 Swiss francs. The company today confirmed its full-year guidance after three profit warnings in the past seven months.

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.