Europe Stocks Rise as Alcoa Matches Estimates

By Sarah Jones - Jan 10, 2012 7:39 PM GMT+0700
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A photograph shows BHP Billiton Ltd.'s copper mining operations in Spence, Chile. Source: BHP Billiton Ltd. via Bloomberg

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Jan. 10 (Bloomberg) -- Benjamin Pedley, head of investment strategy for North Asia at HSBC Private Bank, talks about global financial markets and his investment strategy. He also discusses the U.S. economy, Australia's economy and central bank monetary policy, and Europe's sovereign debt crisis. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

European stocks rose, rebounding from yesterday’s drop, led by a rally in mining companies after Alcoa Inc. (AA) kicked off the U.S. earnings season with results that met analysts’ estimates. Asian shares and U.S. index futures also gained.

BHP Billiton Ltd. (BHP) climbed more than 3 percent as copper rebounded from a one-week low on record monthly imports of the metal in China. Volkswagen AG (VOW) jumped more than 3 percent as German carmakers said they plan to grow faster than competitors after setting sales records last year. U.K. retailers rallied.

The Stoxx Europe 600 Index advanced 1.6 percent to 250.47 at 12:37 p.m. in London, erasing yesterday’s 0.5 percent drop. The MSCI Asia Pacific Index increased 1.2 percent as slowing Chinese import growth boosted speculation the government may act to spur economic growth. Standard & Poor’s 500 Index futures expiring in March rose 1 percent.

Most investors “look forward to 2012 with a sense of cautious optimism that things will be brighter,” wrote Robert Buckland, chief global strategist at Citigroup Inc. in a report to clients dated yesterday. “Despite the obvious macro headwinds, global corporate earnings and cash flow continue to grow at a solid rate.”

U.S. index futures climbed even as Alcoa reported its first quarterly loss since 2009. The largest U.S. aluminum producer reported a fourth-quarter net loss, excluding restructuring costs, of 3 cents a share, matching the average analyst estimate compiled by Bloomberg. Sales rose 6 percent.

Alcoa, the first company in the Dow Jones Industrial Average (INDU) to report earnings for the quarter, climbed 2.4 percent in early New York trading.

Merkel-Sarkozy Meeting

European stocks retreated yesterday, trimming three weeks of gains for the Stoxx 600, as a meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy failed to ease concern that euro-leaders will fail to do enough to resolve the sovereign-debt crisis.

The euro gained for a second day today before Merkel and the International Monetary Fund’s managing director Christine Lagarde meet in Berlin.

Italian Prime Minister Mario Monti will also visit Berlin this week. Sarkozy and Merkel will both travel to Rome on Jan. 20 for negotiations with the Italian government before the next European Union summit meeting in Brussels on Jan. 30.

Mining Companies

BHP Billiton, the world’s largest mining company, gained 3.2 percent to 2,009.5 pence, while Rio Tinto, the third- biggest, increased 3.3 percent to 3,418.5 pence and Xstrata Plc added 2.8 percent to 1,039.5 pence.

Copper rallied on the London Metal Exchange as China imported record amounts of the metal in December. Inbound shipments of the refined metal, copper alloy and products climbed for a seventh month, rising to 508,942 tons, according to customs data.

Carmakers advanced as Bayerische Motoren Werke AG (BMW), Daimler AG (DAI) and Audi AG, owned by Volkswagen, said they plan to beat industry growth in 2012 following record sales last year.

BMW’s deliveries this year will rise by a single-digit percentage that outpaces the car market’s expansion of 4 percent to 5 percent, Ian Robertson, the company’s sales chief, told reporters yesterday at the North American International Auto Show in Detroit. The chief executive officers of Audi and Daimler said they expect their sales to exceed 4 percent.

BMW, Daimler, Volkswagen

Volkswagen gained 3.2 percent to 125.60 euros, BMW rallied 3.7 percent to 58.96 euros and Daimler rose 4 percent to 38.19 euros.

U.K. retailers advanced with Marks & Spencer Group Plc (MKS) climbing 3 percent to 317.8 pence after the U.K.’s largest clothing retailer reported increased Christmas sales led by gains in its food unit. The company maintained its full-year profit outlook as cost reductions offset discounts on apparel.

Revenue at U.K. stores open at least a year increased 0.5 percent in the 13 weeks ended Dec. 31. U.K. food sales rose 3 percent, beating the 2 percent median estimate. Sales fell 1.8 percent in the general-merchandise division, missing the median analyst estimate in a Bloomberg survey.

Debenhams Plc (DEB) surged 9.8 percent to 62.45 pence after the U.K.’s second-largest department-store chain reported Christmas sales that beat analysts’ estimates and predicted that pressure from commodity costs will ease.

Revenue at stores open at least a year was unchanged, excluding value-added tax, in the 18 weeks ended Jan. 7. That compared with the median analyst estimate for a 0.5 percent decline. Group gross transaction value rose 0.5 percent.

Commerzbank, UniCredit

A gauge of bank shares made the biggest contribution to the Stoxx 600’s advance, gaining 3 percent. Commerzbank AG surged 7.5 percent to 1.27 euros after Germany’s second-largest lender said its funding needs for 2012 have fallen to as little as 6 billion euros.

Swatch Group AG (UHR) jumped 3 percent to 374.70 Swiss francs after revenue climbed to a record in 2011. The biggest maker of Swiss watches reported a 22 percent increase in gross sales on a constant-currency basis to 7.14 billion francs ($7.5 billion). The franc’s strength stripped 696 million francs from revenue.

Cie. Financiere Richemont SA, the owner of the Cartier brand, added 1.8 percent to 51.05 francs.

Royal Philips Electronics NV sank 4.7 percent to 14.91 euros after the world’s biggest maker of light bulbs reported a 45 percent drop in fourth-quarter earnings before interest, taxes and amortization to about 500 million euros ($638 million). Philips reiterated its 2013 financial targets.

Actelion, Software AG (SOW)

Actelion Ltd. (ATLN) lost 2.1 percent to 32.74 francs after the drugmaker said it missed its 2011 profit-growth forecast and repeated that sales this year will fall as it faces increased pricing and competitive pressure.

The company will take a charge of as much as 35 million euros for sums it’s owed by public hospitals and other institutions in southern Europe, the company said. Without the provision, Actelion would have met a target of low double-digit earnings growth in local currencies, it said.

Software AG sank 22 percent to 23.55 euros, its biggest drop since 2002, after Germany’s second-largest software maker reported fourth-quarter profit and sales that missed analysts’ estimates as its U.S. business weakened.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

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