By Adria Cimino - Dec 7, 2011 5:54 PM GMT+0700
European stocks advanced amid speculation that euro-area leaders will agree on enhanced bailout measures for indebted nations and stricter rules for budget control at a summit this week. U.S. index futures and Asian shares also rose.
Banks paced gains with Deutsche Bank AG (DBK) and BNP Paribas SA increasing at least 1.9 percent. Randgold Resources Ltd. (RRS) led a rally in commodity shares as metals prices advanced. Verbund AG (VER), Austria’s biggest utility, added 5.5 percent after Morgan Stanley raised its recommendation on the stock.
The benchmark Stoxx Europe 600 Index climbed 0.5 percent to 243.18 at 10:53 a.m. in London, its third increase in four days. The gauge slipped 0.3 percent yesterday after Standard & Poor’s put 15 euro-area nations on credit-rating review. The December contract the S&P 500 Index added 0.6 percent, while the MSCI Asia Pacific Index jumped 1.3 percent today.
“We’re at the point in Europe where we need to find a path about how we are going to deal with the region and fiscal integration,” said Virginie Maisonneuve, head of global equities at Schroder Investment Management Ltd. in London. With the latest proposals, “we’re closer than we’ve been” to agreeing on stricter budget rules, she said.
The Stoxx 600 last week posted its biggest rally since November 2008 as central banks lowered the interest rate on dollar funding and China reduced its reserve ratio for banks.
Two Bailout Funds
The Financial Times reported that officials are negotiating a bigger rescue effort to discuss at the EU summit in Brussels tomorrow and Dec. 9, including running two separate bailout funds simultaneously. That means the European Financial Stability Facility, the current bailout fund, will not be wound up when the European Stability Mechanism starts next year, the FT said. Enhancing support from the International Monetary Fund is also among measures to be discussed at the meeting.
German Chancellor Angela Merkel and French President Nicolas Sarkozy will push for rewriting EU treaties to tighten control of national budgets. This move won the backing of U.S. Treasury Secretary Timothy F. Geithner, who urged governments to work with central banks to erect a “stronger firewall” to end the debt crisis.
At its meeting tomorrow, the European Central Bank will cut its benchmark interest rate to 1 percent from 1.25 percent, according to the median estimate of economists surveyed by Bloomberg News.
German Debt Auction
Germany sold 4.09 billion euros ($5.5 billion) of five-year notes to yield 1.11 percent. The nation got bids for 8.67 billion euros. German bonds advanced after the auction.
Greek Prime Minister Lucas Papademos received parliamentary approval for the 2012 budget, a financial plan that aims to nearly halve the deficit shortfall from a debt writedown and ensure Greece remains a member of the euro area.
A gauge of European banks gained 1 percent for the second- largest contribution to the Stoxx 600’s advance. Deutsche Bank and BNP Paribas (BNP), the biggest lenders in Germany and France, increased 1.9 percent to 30.22 euros and 2.5 percent to 33.87 euros respectively.
Shares of commodity companies rallied 1.4 percent as copper, lead, nickel, tin and zinc rose on the London Metal Exchange. Randgold Resources jumped 3.4 percent to 6,935 pence. Vedanta Resources Plc added 2.9 percent to 1,117 pence. Xstrata Plc gained 2.2 percent to 1,070.5 pence.
Verbund, ICAP
Verbund climbed 5.5 percent to 20.04 euros. Morgan Stanley raised its shares to “overweight” from “equal weight.”
ICAP Plc (IAP), the biggest broker of transactions among banks, fell 3.7 percent to 352.9 pence. The stock was cut to “equal weight” from “overweight” at Morgan Stanley.
Carillion Plc (CLLN), a British construction and services company, jumped 4.1 percent to 319.1 pence. The company said it expects its debt to drop below 100 million pounds ($156 million) by end of the year, beating its earlier target of 125 million pounds. The stock was raised to “buy” from “hold” at Collins Stewart Hawkpoint Plc.
Zodiac Aerospace (ZC), the world’s second-biggest maker of aircraft seats, added 2.4 percent to 62.71 euros. The stock was raised to “outperform” from “neutral” at Exane BNP Paribas.
Metro AG (MEO), Germany’s biggest retailer, slid 3.7 percent to 30.68 euros, extending yesterday’s 14 percent loss. The stock was cut to “sell” from “neutral” at Citigroup Inc. The stock also was downgraded at banks (SX7P) including Deutsche Bank and JPMorgan Chase & Co. after Metro yesterday forecast declines in sales and earnings this year.
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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