European Stocks Advance After Italy’s Borrowing Costs Decline

By Corinne Gretler - Dec 28, 2011 6:42 PM GMT+0700

European stocks climbed for a fourth day after Italy’s borrowing costs fell at a debt sale, easing concern that the region’s sovereign-debt crisis may worsen. U.S. index futures advanced, while Asian shares dropped.

Banca Popolare di Milano and Banca Monte dei Paschi di Siena SpA (BMPS) led a rally in Italian lenders. Tesco Plc (TSCO), the U.K.’s largest supermarket chain, jumped 2.2 percent. Xstrata Plc (XTA) declined as copper pared a four-day gain.

The benchmark Stoxx Europe 600 Index gained 0.5 percent to 243.04 at 11:40 a.m. in London. The gauge rallied 2 percent in the previous three sessions as investors turned attention from the debt crisis to U.S. data that showed the recovery in the world’s largest economy is gathering pace. Futures on the Standard & Poor’s 500 Index expiring in March added 0.2 percent. The MSCI Asia Pacific Index retreated 0.5 percent.

“The odds to have a real problem in Italy in 2012 are much lower today than what they were three or four months ago,” said Jean-Paul Jeckelmann, chief investment officer at Banque Bonhote & Cie. in Neuchatel, Switzerland, who helps manage $1.4 billion in equities. “While today sets a hopeful basis, the real test is what happens with the long-term financing, which is much more difficult for investors and banks to carry in their books.”

Italian Debt Auction

Italy today sold 9 billion euros ($11.8 billion) of six- month Treasury bills at half the yield it paid at an auction of the securities last month. The Rome-based Treasury sold the 179- day bills at a rate of 3.251 percent, down from 6.504 percent on Nov. 25. Demand was 1.7 times the amount on offer, compared with 1.47 times last month.

Italy also sold 1.733 billion euros of 2013 notes today to yield 4.853 percent, compared with a yield of 7.814 percent at the last auction on Nov. 25. The bid-to-cover ratio was 2.24, compared with 1.59 last month. Tomorrow Italy will auction four different securities, including a 10-year bond.

Britain faces the “toughest” job market in two decades with the number of working people likely to fall by 120,000 in 2012, the Chartered Institute of Personnel and Development said.

“The U.K. jobs market will be weaker than at any time since the recession of the early 1990s,” John Philpott, chief economic adviser at the CIPD, an association for human-resource professionals, said in a statement. “The combination of worsening job shortages for people without work, mounting job insecurity and a further fall in real earnings for those in work may test the resilience and resolve of the U.K. workforce far more than it did in the recession of 2008-9.”

Greek Elections

Greece will hold national elections at the end of April, state-run Athens News Agency reported, citing Finance Minister Evangelos Venizelos. The new poll date provides the government of Prime Minister Lucas Papademos more time to complete a new financing agreement and a debt swap, the newswire reported.

National Bank of Greece SA (ETE), the country’s biggest lender, rallied 4.3 percent to 1.69 euros and EFG Eurobank Ergasias SA (EUROB) jumped 6.9 percent to 38.5 euro cents.

Banca Popolare di Milano rose 2.4 percent to 31.2 euro cents and Banca Monte dei Paschi di Siena increased 2.7 percent to 25.9 euro cents. Azimut Holding SpA (AZM), which offers investment management services, jumped 2.9 percent to 6.22 euros.

Tesco gained 2.2 percent to 399.5 pence as a gauge of European (SXXP) retailers was the among the best performers of the 19 industry groups in the Stoxx 600. Debenhams Plc (DEB) added 4.1 percent to 58.9 pence while Dufry AG, the operator of duty-free shops, gained 1.2 percent to 85.90 Swiss francs.

Holiday Shopping

U.K. shopper numbers for the Boxing Day of Dec. 26 rose 22 percent from a year earlier, market researcher Experian FootFall reported yesterday.

Bayerische Motoren Werke AG (BMW), the world’s biggest maker of luxury cars, fell 0.9 percent to 52.34 euros and Porsche AG dropped 1.5 percent to 41.57 euros. Daimler AG slid 0.7 percent to 34.17 euros.

Xstrata lost 0.8 percent to 972.1 pence. Copper retreated in London after a report that industrial production declined in Japan, curbing demand for industrial metals.

Deutsche Bank AG (DBK) and Commerzbank AG (CBK), Germany’s biggest lenders, declined 1.8 percent to 29.21 euros and 1.4 percent to 1.30 euros respectively. Societe Generale SA slipped 1 percent to 16.67 euros.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

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