European Stocks Advance as Spain, Italy Meet Debt-Sale Targets; RBS Gains

By Adria Cimino - Jan 12, 2012 7:10 PM GMT+0700

European (SXXP) stocks advanced after Spain and Italy sold debt at lower borrowing costs, signaling continued investor appetite for euro-area securities. U.S. index futures climbed, while Asian shares were little changed.

Royal Bank of Scotland Group Plc rose 8.4 percent after announcing job cuts. Sulzer AG, the world’s second-largest maker of pumps, added 5.4 percent after saying full-year orders increased 14 percent. Tesco Plc led retail shares lower after the U.K.’s largest supermarket chain said it was “disappointed” with festive trading. Vestas Wind Systems A/S and Delhaize Group SA (DELB) tumbled.

The Stoxx Europe 600 Index gained 0.8 percent to 252.02 at 12:07 p.m. in London, after the U.S. Federal Reserve yesterday confirmed the world’s largest economy continues to grow. The March contract on the Standard & Poor’s 500 Index increased 0.6 percent. The MSCI Asia Pacific Index lost less than 0.1 percent.

“The debt sales in Italy and Spain are important elements for the market,” said Bruno Ducros, a fund manager at CamGestion in Paris, which oversees about $3.8 billion in stocks. “The Fed’s confirming of U.S. growth is good news. It is a relief for the market and eases worries of a slowdown in the U.S. The market is looking for zones of growth.”

Bond Auctions

Spain sold 9.98 billion euros ($12.7 billion) of bonds maturing in 2015 and 2016, including a new three-year benchmark security, twice the maximum target of 5 billion euros set for the sale. The yield on the three-year notes was 3.384 percent, compared with 5.187 percent when the nation sold similar notes in December.

Italy sold 12 billion euros of Treasury bills, meeting its target, and its borrowing costs plunged. The Rome-based Treasury sold 8.5 billion euros one-year bills at a rate of 2.735 percent, down from 5.952 percent at the last auction.

The U.S. economic expansion improved last month across most of the country, while hiring was limited and housing remained stagnant, the Fed said in the first edition of its Beige Book in 2012.

The Stoxx 600 has advanced 3.1 percent since the beginning of this year as economic reports around the world added to optimism the global economy can withstand the euro area’s debt crisis.

Economic Reports

Sales at U.S. retailers probably rose in December as Americans bought discounted holiday items, giving the economy a boost entering 2012, economists said before a report today. Initial jobless claims rose to 375,000 last week from 372,000 the previous period, data from the Labor Department may show.

In the U.K., the Bank of England maintained its benchmark interest rate at 0.5 percent and its asset-purchase plan at 275 billion pounds ($422 billion). Both decisions matched economists’ estimates in a Bloomberg survey.

The European (SXXP) Central Bank will leave its key rate at 1 percent today, a separate survey shows, and ECB President Mario Draghi will speak at 2:30 p.m. in Frankfurt.

RBS advanced 8.4 percent to 23.61 pence. Britain’s biggest government-owned lender will cut 3,500 jobs at its investment bank over the next three years as it exits its unprofitable cash equities and mergers advisory operations.

RBS said it will sell or close the units, along with its corporate broking and equity capital markets operations. The bank also said it cut a further 2,000 positions in the second half of last year.

Sulzer (SUN), Petroplus

Sulzer jumped 5.4 percent to 112.8 Swiss francs. The company said 2011 orders rose 14 percent, or 8.4 percent nominally, to 3.6 billion francs ($3.8 billion).

Petroplus Holdings AG surged 28 percent to 1.53 francs. Europe’s largest independent refiner has reached a temporary agreement with lenders to renegotiate its debts and maintain operations at its Coryton and Ingolstadt refineries.

UniCredit SpA (UCG) climbed 11 percent to 2.85 euros. The stock was raised to “buy” from “neutral” at Citigroup Inc., which said the stock would suit a high-risk investment strategy as it offers significant “upside potential.”

Solar shares gained after a government body said China plans to double solar capacity this year. The head of China’s National Energy Administration, Liu Tienan, said yesterday that the country will install 3 gigawatts in 2012.

Wacker Chemie AG (WCH), the second-biggest maker of solar-grade silicon, advanced 6 percent to 78.02 euros. Solarworld AG (SWV), Germany’s largest solar-panel maker, rose 9.9 percent to 3.94 euros.

Retailers Slide

Tesco tumbled 13 percent to 334.35 pence. The company said sales declined in the six weeks to Jan. 7 and that profit would be at the “low end of the current consensus range.” U.K. sales at stores open at least a year fell 2.3 percent, excluding fuel and value-added tax, during the period.

Retail shares slid 4.4 percent for the biggest drop among the 19 industry groups in the Stoxx 600. J Sainsbury Plc (SBRY) lost 5.2 percent to 286.5 pence. William Morrison Supermarkets Plc, the smallest of the U.K.’s four main food retailers, retreated 5.5 percent to 287.2 pence.

Delhaize dropped 9.1 percent to 42.61 euros. The owner of Food Lion supermarkets plans to cut about 5,000 positions and expects a 2.4 percent drop in revenue as it closes stores in the U.S. and Europe. Costs related to the closures will hurt earnings by about 205 million euros starting in the first quarter, the Brussels-based company said.

Vestas lost 4.2 percent to 60.30 kroner. The biggest wind- turbine maker said it’s cutting 2,335 jobs worldwide and a further 1,600 posts are at risk in the U.S. this year as a tax credit expires.

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.