European Stocks Advance as Ministers Set Rescue Limit

By Tom Stoukas - Mar 30, 2012 7:36 PM GMT+0700

European stocks rose, extending the best first-quarter rally for the Stoxx Europe 600 Index (SXXP) since 2006, as euro-area finance ministers set the overall ceiling for the rescue of the region’s indebted nations at $1.1 trillion. U.S. index futures and Asian shares also climbed.

Daimler AG rallied after Bank of America Corp. recommended buying the shares. Credit Agricole SA (ACA) advanced 2.2 percent as it began talks with China’s Citic Securities Co. to sell its CLSA brokerage unit. HeidelbergCement AG (HEI) jumped 5.5 percent after HSBC Holdings Plc raised its rating on the stock.

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March 30 (Bloomberg) -- Richard Koo, chief economist at Nomura Research Institute, discusses the economic outlook for Spain. He speaks with David Tweed in Cernobbio, Italy, on Bloomberg Television's "Countdown." (Source: Bloomberg)

The Stoxx Europe 600 Index (SXXP) gained 0.8 percent to 262.73 at 1:34 p.m. in London. The benchmark gauge has gained 7.5 percent so far this year as Greece obtained a second bailout and U.S. economic data beat forecasts. Futures on the Standard & Poor’s 500 Index expiring in June added 0.4 percent today. The MSCI Asia Pacific Index rose 0.3 percent.

“The U.S. recovery is now sustainable and, of course, Europe is still at pains but northern Europe remains one of the stronger areas in terms of growth,” said Larry Hatheway, a London-based economist and asset-allocation strategist at UBS AG. He spoke to Linda Yueh and Mark Barton in a Bloomberg Television interview.

The volume of shares changing hands on the companies listed on the Stoxx 600 was 7.8 percent higher than the average of the last 30 days, data compiled by Bloomberg show.

Financial Firewall

Euro-area ministers, meeting in Copenhagen today, set the maximum lending volume of the proposed European Stability Mechanism at 500 billion euros ($667 billion) and the combined lending ceiling of the ESM and the temporary fund -- the European Financial Stability Facility -- at 700 billion euros.

This, in addition to the 102 billion euros already paid to support current rescue programs, takes the total size of the firewall to 800 billion euros, the Eurogroup said in a statement.

“Finally, Robust firewalls have been established,” the ministers said in the statement. “This comprehensive strategy has paid off and led to a significant improvement in market conditions.”

In the U.S., consumer spending rose in February by the most in seven months, showing the biggest part of the economy is strengthening.

Purchases climbed 0.8 percent, the largest gain since July, Commerce Department figures showed.. The median estimate of economists surveyed by Bloomberg News called for a 0.6 percent increase. Incomes advanced less than projected, sending the saving rate down to the lowest level in more than two years.

Consumer Sentiment

Another report may show the Thomson Reuters/University of Michigan final March confidence index fell to 74.5 from 75.3 the previous month, according to the median forecast in a Bloomberg survey. That would be the first monthly decline since August.

Daimler rose 2.9 percent to 45.53 euros as a gauge of European carmakers was the best-performing group in the Stoxx 600. Bank of America recommended buying Daimler’s shares, saying the company “is finally cutting out costs, reducing complexity, simplifying engineering and refreshing the product portfolio.”

Bayerische Motoren Werke AG (BMW) advanced 3 percent to 67.80 euros. Preferred shares of Volkswagen, Europe’s largest maker of automobiles, gained 2.2 percent to 132.55 euros.

Michelin & Cie, the world’s second-largest tiremaker, climbed 2.6 percent to 55.98 euros and Continental AG (SXXP) rallied 5.1 percent to 72.16 euros.

CLSA Brokerage Stake

Credit Agricole rose 2.2 percent to 4.72 euros after its corporate and investment banking unit entered exclusive talks with Citic Securities Co., China’s largest broker by market value, to sell the remaining 80.1 percent stake in its CLSA brokerage unit.

BHP Billiton, the world’s biggest mining company, added 2.4 percent to 1,922.5 pence as a gauge of mining shares rose 2.6 percent. Rio Tinto Group, the world’s third-largest mining company, gained 3.1 percent to 3,481.5 pence.

HeidelbergCement jumped 5.5 percent to 45.92 euros after HSBC upgraded the stock to overweight from neutral, meaning that investors should hold more shares than is represented in benchmark indexes. Lafarge SA (LG), the world’s biggest cement maker, advanced 5.3 percent to 36.05 euros.

Meyer Burger Technology gained 2.4 percent to 14.95 Swiss francs after HSBC raised its recommendation on the shares to neutral, the equivalent of hold, from underweight, the equivalent of sell.

Bad Bank

Commerzbank AG (CBK) added 3.2 percent to 1.92 euros. Germany’s second-largest bank plans to set up a so-called bad bank to liquidate its Eurohypo AG public-finance and commercial-property unit over the coming years, Handelsblatt reported, citing unidentified people in the finance industry.

Vestas Wind Systems A/S, the world’s largest wind-turbine maker, surged 5 percent to 58.40 kroner. The stock was raised to neutral from sell at UBS AG, which said the company could be a target for acquisition.

Subsea 7 SA added 2.7 percent to 150.4 kroner. The oilfield-services provider won a $175 million contract for work at the Cheviot Oil Field.

Telecom Italia SpA fell 2.3 percent to 88 euro cents. Italy’s biggest phone company posted a bigger-than-estimated loss in 2011 after Italy’s largest phone company wrote down goodwill for 7.3 billion euros ($9.68 billion).

Shire Plc dropped 3.5 percent to 2,044 pence after saying the experimental drug SPD476 to treat diverticulitis failed to meet the main goal of an investigational study and that the company won’t pursue a regulatory filing.

To contact the reporter on this story: Tom Stoukas in Athens at astoukas@bloomberg.net

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