European Stocks Rise as Berlusconi Awaits Vote

By Peter Levring - Nov 8, 2011 6:04 PM GMT+0700

European stocks rose, with the Stoxx Europe 600 Index rebounding from a two-day decline, as investors awaited a vote on Italy’s budget that will show whether Prime Minister Silvio Berlusconi still has a majority. U.S. index futures advanced, while Asian shares fell.

Vodafone Group Plc (VOD) gained 2.3 percent after increasing its full-year earnings forecast as profit beat analysts’ estimates. Repsol YPF SA (REP) climbed 5.4 percent after raising its prediction for recoverable reserves in Argentina. Banks rallied as Societe Generale SA, France’s second-biggest bank, and Lloyds Banking Group Plc (LLOY), the largest mortgage lender in the U.K., both gained more than 7 percent.

The Stoxx 600 rose 1.4 percent to 241.65 at 11:00 a.m. in London. The benchmark measure has rallied 12 percent since this year’s low on Sept. 22 as investors speculated that the euro area would protect the economies of Italy and Spain from the sovereign-debt crisis.

“If Berlusconi leaves, it’ll cause some political unrest, but most likely also a sigh of relief in the markets,” wrote Lars Moegeltoft, a chief equity adviser at Nordea Private Banking in Copenhagen, in a note to clients. “The big swings in the market will continue as focus stays on the two items that draw attention: Greece and Italy.”

The MSCI Asia Pacific Index fell 0.7 percent today, while Standard & Poor’s 500 Index futures expiring in December climbed 0.3 percent.

Berlusconi’s Budget Vote

Italian Prime Minister Silvio Berlusconi must show today that he has enough support in parliament to stay in power and implement austerity measures to trim the region’s second-biggest debt and bring down borrowing costs. The yield on 10-year Italian bonds slipped to 6.62 percent today after yesterday climbing to a euro-era record.

The country’s Chamber of Deputies will vote at 3:30 p.m. in Rome on a routine report on last year’s budget plan that will reveal whether Berlusconi retains a majority in the 630-seat house. European stocks dropped over the past two days, as two Berlusconi allies defected to the opposition and a third one quit before today’s vote.

In Greece, Prime Minister George Papandreou resumes talks with the opposition in Athens as the ruling Pasok party and the rival New Democracy move closer to naming the premier of a national-unity government to secure rescue funds.

In the U.S., the S&P 500 climbed yesterday as European Central Bank Executive Board member Juergen Stark said the region’s debt crisis will be “under control” in two years. Stark spoke at an event in Lucerne, Switzerland.

German Exports Climb

In Germany, a report from the Federal Statistics Office in Wiesbaden showed that the country’s exports unexpectedly rose for a second month in September, helping Europe’s largest economy weather the sovereign-debt crisis.

Exports, adjusted for work days and seasonal changes, increased 0.9 percent, the report said. Economists had forecast a drop of 0.8 percent, according to the median of 14 estimates in a Bloomberg News survey.

The Stoxx 600 traded at 10.4 times the estimated earnings of its companies, compared with the average multiple of 12 over the past five years, according to data compiled by Bloomberg. Some 47 percent of the 219 companies in the benchmark measure that have released earnings since Oct. 11 beat analysts’ profit estimates compared with 44 percent that missed projections, according to data compiled by Bloomberg.

Vodafone, Repsol, Lloyds

Vodafone advanced 2.3 percent to 176.8 pence. Europe’s third-largest phone company by sales predicted full-year adjusted operating profit of 11.4 billion pounds ($18.3 billion) to 11.8 billion pounds, the upper half of the range indicated in May. First-half earnings before interest, taxes, depreciation and amortization gained 2.3 percent to 7.53 billion pounds in the six months through September. Analysts had predicted profit of 7.42 billion pounds.

Repsol surged 5.4 percent to 22.03 euros after its YPF SA unit in Argentina raised estimates for the Loma La Lata field in northern Patagonia to 927 million barrels of shale oil.

Lloyds jumped 8.2 percent to 30 pence after posting smaller-than-estimated provisions for bad loans in the third quarter and saying it may miss its income target for 2014.

“There was some nervousness in the market ahead of these results,” said Bruce Packard, a banking analyst at Seymour Pierce Ltd. in London. “The fact that there were no monsters in there is reassuring. I didn’t think their 2014 targets were ever achievable.”

Societe Generale (GLE) Rallies

Societe Generale SA shares advanced 7.7 percent to 18.84 euros after the bank said it won’t pay a dividend for 2011, a decision that will reduce its capital needs under European Banking Authority requirements.

The lender also said third-quarter profit fell 31 percent, hurt by a 333 million-euro ($459 million) pretax writedown on Greek sovereign debt and lower trading revenue. Net income dropped to 622 million euros from 896 million euros a year earlier.

Nobel Biocare Holding AG (NOBN) soared 9.4 percent to 11.37 Swiss francs after the world’s second-biggest dental implant maker posted third-quarter sales of 128.2 million euros. That exceeded the 125.7 million-euro average estimate of 15 analysts. The company sold more expensive prosthetics in North America and Asia than it had forecast.

Prudential Plc (PRU) climbed 2.6 percent to 634 pence as the U.K.’s largest insurer by market value reported that sales climbed to 2.7 billion pounds in the first nine months of the year from 2.46 billion a year earlier.

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