European Stocks Rise on Chinese Manufacturing

By Adria Cimino - Feb 1, 2012 5:14 PM GMT+0700

European (SXXP) stocks advanced for a second day, with the Stoxx Europe 600 Index extending its best start to a year since 1998, amid signals that manufacturing growth is gaining pace from America to China. U.S. index futures climbed, while Asian shares were little changed.

Banks and utilities led gains. ICAP Plc (IAP) jumped 8.6 percent after saying annual pretax profit will be at the “upper end” of the range of analysts’ estimates. RWE AG (RWE) climbed after Morgan Stanley added the stock to its best ideas list. Roche Holding AG (ROG), the world’s biggest maker of cancer drugs, fell 1.5 percent after earnings fell short of analysts’ estimates.

The Stoxx 600 rose 1.3 percent to 257.82 at 10:11 a.m. in London. The benchmark gauge rallied 4 percent last month, the biggest January gain since 1998, as the U.S. economy maintained its recovery and speculation grew that European (SXXP) policy makers will contain the region’s debt crisis. Standard & Poor’s 500 Index futures added 0.7 percent, while the MSCI Asia Pacific Index increased less than 0.1 percent.

“U.S. manufacturing data is key,” said Guillaume Duchesne, an equity strategist at BGL BNP Paribas SA in Luxembourg. “The markets have rebounded as U.S. economic reports were better than expected. Industrial activity is doing well. Jobs data at the end of the week will be important. As long as there are good economic surprises, that will support stocks.”

Manufacturing in the world’s largest economy probably grew at a faster pace last month, a report at 10 a.m. New York time may show. The Institute for Supply Management’s factory index rose to 54.5, the highest since June, from 53.1 in December, according to the median estimate of 81 economists surveyed by Bloomberg News. Readings greater than 50 signal growth.

China, Euro Area

Chinese manufacturing rose last month as the world’s second-biggest economy withstood weaker exports driven by the euro-area debt crisis and a government-induced property slowdown. The official purchasing managers’ index increased to 50.5 in January from 50.3 in December, exceeding the median estimate in a Bloomberg News survey for a reading below the 50 level that divides expansion from contraction.

In the euro area, a gauge of manufacturing beat estimates in January. The Markit Economics final purchasing managers’ index rose to 48.8 from 46.9 in the prior month. That surpassed a forecast for 48.7 by 27 economists in a Bloomberg News survey.

Sweeter Greek Deal

Greek bondholders may get a sweetener tied to a revival in economic growth that would ease the impact of accepting a lower interest rate on new bonds, people with knowledge of the talks said.

Three out of 5 European companies on record are missing profit estimates, according to data compiled by Bloomberg News.

Siemens AG (SIE) and Ericsson AB are among the 59 percent of Stoxx Europe 600 Index companies reporting earnings that fell short of forecasts during the current quarter, the data show. That’s the worst ratio since Bloomberg started collating estimates in 2006, with 39 percent of companies missing projections in an average quarter.

Bank shares rose 2.1 percent for the best performance on the Stoxx 600. Banco Santander SA, Spain’s biggest lender, advanced 2.1 percent to 6.07 euros. Santander remains Nomura’s preferred Spanish bank, analysts wrote in a note. Nomura maintained its “underweight” position on the country’s lenders. Credit Agricole SA (ACA), France’s third-largest bank, rallied 4.2 percent to 4.91 euros.

RWE, Fortum

RWE (RWE), Germany’s second-largest utility, added 4.2 percent to 30.47 euros. Morgan Stanley added the shares to its best ideas list, saying the company has a more focused disposal program.

Fortum Oyj (FUM1V), Finland’s biggest utility, gained 4.1 percent to 17.49 euros. The company reported fourth-quarter net income of 421 million euros ($550 million), surpassing analyst estimates of 339 million euros.

BP Plc, Europe’s second-biggest oil company, gained 3 percent to 485.05 pence.

ICAP jumped 8.6 percent to 365 pence. The world’s largest broker of inter-bank transactions said pretax profit for the fiscal year ending March 31 will be at the “upper end” of the current range of analyst estimates of 336 million pounds ($528 million) to 358 million pounds. ICAP had said in November it expected full-year profit to be within analysts’ projections at that time of 358 million pounds to 390 million pounds.

Infineon Technologies AG (IFX) advanced 5.2 percent to 7.34 euros after its operating profit fell less than analysts’ projections.

Profit in the fiscal first quarter, ended Dec. 31, was 20 percent lower at 141 million euros compared to 177 million euros a year ago as sales rose 2.6 percent to 946 million euros, the company said. Twelve analysts polled by Bloomberg had expected an average operating profit of 127 million euros and sales of 934 million euros.

Deutsche Boerse

Deutsche Boerse AG rose 1.3 percent to 45.40 euros. The shares pared gains of as much as 3.2 percent after the European Commission blocked the plan for Deutsche Boerse’s merger with NYSE Euronext.

Yara International ASA (YAR) gained 2.4 percent to 241.8 kroner. The company has bought 16 percent of Burrup Holdings Ltd. for $143 million, increasing its stake to 51 percent. Apache Energy has signed a deal with Yara for 49 percent of the company, Yara said.

Roche, Sandvik

Roche Holding fell 1.5 percent to 153.50 Swiss francs. Net income last year rose to 9.5 billion francs ($10.3 billion) from 8.9 billion francs a year earlier, the company said. Earnings per share excluding some items were 12.30 francs, falling short of the 12.46-franc average estimate of 26 analysts surveyed by Bloomberg.

Roche forecast high single-digit percentage growth in earnings per share this year as pharmaceutical sales increase and a cost-cutting program takes effect. The company said it sees a challenging market environment.

Sandvik AB (SAND) lost 3.6 percent to 96.90 kronor. The world’s biggest maker of metal-cutting tools reported fourth-quarter profit that missed analysts’ estimates as the company booked costs related to job cuts.

Net income fell to 731 million kronor ($107 million) from 2.09 billion kronor a year earlier, the company said. Ten analysts on average had estimated profit of 1.19 billion kronor in a Bloomberg News survey.

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.