European Stocks Gain After German Business Confidence Increases

By Adam Haigh - Nov 24, 2011 7:22 PM GMT+0700

European stocks rose, snapping their longest stretch of losses since August, after a report showed German business confidence unexpectedly increased in November. U.S. index futures advanced.

BHP Billiton Ltd. (BHP), the world’s biggest mining company, led gains in the shares of commodity companies, as copper and nickel prices climbed. Arkema SA (AKE) rallied 10 percent after analysts upgraded their recommendations on the shares following its plan to sell its vinyl business.

The benchmark Stoxx Europe 600 Index climbed 1.1 percent to 222.67 at 12:08 p.m. in London. The gauge had tumbled 7.1 percent over the past five days as soaring bond yields in Italy, Spain and France compounded concern that the region’s leaders are struggling to control the debt crisis.

“We still see some ‘bright-ish’ spots in all the doom and gloom that surrounds us,” said Annalisa Piazza, a strategist at Newedge Group in London. “Today’s report clearly shows that activity is not going to collapse any time soon in the main European (UKX) economy.”

The Ifo Institute’s business climate index, based on a survey of 7,000 executives, increased to 106.6 this month from 106.4 in October. That beat the median forecast of 105.2 in a Bloomberg News survey.

Futures on the Standard & Poor’s 500 Index expiring in December gained 0.9 percent to 1,170.4, signaling U.S. stocks may halt a six-day slump (SPX) when trading reopens tomorrow. The market is closed today for Thanksgiving and will end at 1 p.m. in New York tomorrow. Futures on the Dow Jones Industrial Average added 87 points, or 0.8 percent, to 11,321.

Euro Bonds

Germany’s coalition government is concerned it may have to agree to the issuing of euro bonds under certain conditions, Bild reported without saying where it obtained the information.

One such condition is the European Union’s consent to tighten its stability pact, Bild said in an e-mailed preview of an article published today.

“There are signs that the German government’s position on common bond issuance is becoming more favorable,” Steven Major, the global head of fixed income research at HSBC Holdings Plc in London, wrote in a report today.

The Stoxx 600 has slumped 19 percent this year as the debt crisis that began in Ireland and Greece spread to the euro area’s major economies and led to calls for bond purchases by the European Central Bank as one way of containing contagion. The ECB was said to buy government debt over the past several days.

Non-Conventional Tools

“Only a massive intervention from the ECB could potentially eradicate liquidity fears,” said Claudia Panseri, the head of equity strategy at Societe Generale SA in Paris. “Intervention from the ECB is not imminent. We believe the market needs to get worse before all the non-conventional tools are used.”

Equity strategists at the biggest investment banks forecast an average 16 percent rally in European stocks through the end of next year, according to the average of 10 estimates in a Bloomberg News survey.

U.K. gross domestic product rose 0.5 percent from the previous quarter, when it increased 0.1 percent, the Office for National Statistics said today in London. The figure matched a previous estimate and the median forecast in a Bloomberg News survey of 32 economists.

German GDP

Germany’s economy rebounded in the third quarter, driven by consumer and company spending, the Federal Statistics Office in Wiesbaden said today.

Private consumption expanded 0.8 percent from the second quarter and company investment in plant and machinery jumped 2.9 percent. Gross domestic product advanced 0.5 percent from the previous three months, the office said, confirming an initial estimate published on Nov. 15. That was an acceleration from the 0.3 percent growth in the second quarter.

Portugal’s credit rating was cut to below investment grade by Fitch Ratings due to the country’s rising debt level and weakening economy. The long-term rating was lowered one level to BB+ from BBB- with a negative outlook, Fitch said.

BHP Billiton rose 2.4 percent to 1,782.5 pence. Rio Tinto Group advanced 2.9 percent to 3,071 pence. Copper, nickel and tin climbed on the London Metal Exchange.

Dexia SA (DEXB) rallied 29 percent to 34.8 euro cents, for an increase of 46 percent in the last two days. The Belgian lender has still lost 86 percent of its value this year after its breakup became inevitable last month as concern over its European sovereign-debt holdings caused its short-term funding to evaporate. Dexia was once the world’s largest lenders to municipalities.

Arkema, Dixons

Arkema jumped 9.7 percent to 49.63 euros. JPMorgan Chase & Co. upgraded the shares to “overweight” from “neutral.”

Dixons Retail Plc (DXNS), the U.K.’s largest electronics retailer, climbed 8.8 percent to 10.18 pence, the biggest increase in 11 weeks, after reporting a first-half loss that was smaller than analysts’ estimates.

Raiffeisen Bank International AG (RBI), eastern Europe’s third- biggest lender, rose 6 percent to 15 euros after reporting a third-quarter profit that beat analysts’ forecasts. Net income fell to 130 million euros from 311 million euros a year earlier, according to a statement today. The average estimate of nine analysts surveyed by Bloomberg called for a profit of 99 million euros.

Cable & Wireless Worldwide Plc (CW/) gained 4 percent to 14.77 pence as Liberum Capital advised buying the stock, citing the recent slump in its share price.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net