European Stocks Gain as U.S. Manufacturing Expands

By Namitha Jagadeesh - Apr 2, 2012 10:35 PM GMT+0700

European stocks climbed the most in almost three weeks, erasing earlier losses, as reports showed manufacturing expanded more than forecast in the U.S. and China.

Oriflame (ORI) Cosmetics SA gained 2.6 percent after Coty Inc. offered to buy Avon Products Inc. for $10 billion. Cookson Group Plc (CKSN) jumped 6.6 percent after the Sunday Times said the company may spin off a unit.

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Employees pass stock index prices displayed on electronic screens at the entrance to the Hellenic Stock Exchange in Athens. Photographer: Kostas Tsironis/Bloomberg

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The benchmark Stoxx Europe 600 Index (SXXP) advanced 1.4 percent to 267.08 at 4:33 p.m. in London, having earlier dropped as much as 0.4 percent. The gauge climbed 7.7 percent in the first quarter, its best start to a year since 2006, boosted by the European Central Bank’s 1 trillion euros ($1.3 trillion) in loans to the region’s financial firms.

“Equity markets ended the first quarter well,” said Simon Denham, managing director of Capital Spreads in London. “That’s enough to make even the most skeptical of bulls mildly optimistic.”

National benchmark indexes advanced in 12 out of 18 western-European markets. France’s CAC 40 Index climbed 1.1 percent, the U.K.’s FTSE 100 Index rose 1.8 percent while Germany’s DAX Index rallied 1.5 percent.

Manufacturing in the U.S. expanded more than forecast in March. The Institute for Supply Management’s factory index climbed to 53.4 from 52.4 in February, data showed. Economists in a Bloomberg News survey had estimated an increase to 53. Readings above 50 signal growth.

China Economy

China’s Purchasing Managers’ Index (CPMINDX) compiled by the logistics federation and the National Bureau of Statistics rose to 53.1 in March from 51 in February.

The gauge, which was released yesterday, has a pattern of gaining each March. In contrast, a PMI from HSBC Holdings Plc and Markit Economics fell to a four-month low of 48.3, showing that manufacturing contracted and export orders declined.

European stocks declined last week as Standard & Poor’s said that Greece may have to restructure its debt again and an ECB policy maker said a bigger bailout package will not solve the fiscal crisis.

Finance ministers from the 17-member monetary union unveiled a package including 500 billion euros in fresh bailout funds on top of 300 billion euros already committed to rescue programs.

IMF Resources

Group of 20 nations that rebuffed German-led pleas for more aid in February will be asked to decide this month whether Europe has done enough to warrant increased resources from the International Monetary Fund. Euro-area finance ministers insisted at a meeting that ended on March 31 in Copenhagen that they’ve fulfilled their side of the bargain.

Germany’s central bank last week said it won’t accept bank bonds guaranteed by Ireland, Greece and Portugal as collateral, which “raised questions about policy cohesiveness” in the euro region, according to Moody’s Investors Services.

This is “a credit negative for euro-area sovereigns and banking systems overall, but particularly for those of Greece, Ireland and Portugal,” Alain Laurin from Moody’s wrote in the report today.

Oriflame paced advancing shares, gaining 2.6 percent to 261.50 kronor after Coty offered to buy Avon, a door-to-door cosmetics seller, for $23.25 a share in cash. Oriflame sells cosmetics at parties hosted in private homes.

Cookson, Novo Nordisk

Cookson Group Plc surged 6.6 percent to 730 pence after the Sunday Times reported the world’s biggest maker of ceramic linings for metal smelters may spin off its electronics unit.

The manufacturer has hired Rothschild to devise a proposal for the unit to sell shares and list on the London Stock Exchange, the newspaper reported yesterday without saying where it got the information.

Novo Nordisk A/S (NOVOB) jumped 5.6 percent to 815.50 kroner. The world’s biggest insulin maker said it will meet its 2014 target date to begin selling an obesity drug, Victoza, Copenhagen-based newspaper Borsen reported, citing an interview with Chief Science Officer Mads Krogsgaard Thomsen.

An advisory panel voted last week to recommend the U.S. Food and Drug Administration require heart studies for all diet pills.

To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net

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