Thursday, September 15, 2011

European Stocks Rally on Greek Support, ECB Liquidity Measures

European stocks rallied as Germany and France said Greece will remain a member of the euro and the European Central Bank announced coordinated measures with the Federal Reserve to ensure banks have enough dollars.

BNP Paribas SA and Credit Agricole SA (ACA) led a surge in financial shares after the ECB said it will lend the U.S. currency to euro-area banks. Hennes & Mauritz AB (HMB) rallied 6.2 percent as the retailer’s sales topped analyst estimates. UBS AG (UBSN) slid 8.4 percent after Switzerland’s biggest bank announced a $2 billion trading loss.

The benchmark Stoxx Europe 600 Index advanced 2.5 percent to 229.76 at 3:14 p.m. in London, extending its three-day increase to 4.9 percent. The gauge has still fallen 21 percent from this year’s peak on Feb. 17 as the region’s growing debt crisis and worse-than-forecast U.S. economic reports added to concern that the global recovery is at risk.

“The euro is a political instrument not a financial instrument and an awful lot will be done to keep the euro area intact,” said Bill Dinning, head of strategy at Kames Capital Plc in Edinburgh. “There are a lot of challenges out there and the market is having a tough time, so we are seeing a little bit of a relief rally.”

Greek Assurances
French President Nicolas Sarkozy and German Chancellor Angela Merkel said late yesterday they are “convinced” Greece will stay in the euro area after a phone conversation with Greek Prime Minister George Papandreou.

ECB President Jean-Claude Trichet is due to give a speech at 8 p.m. in Poland tomorrow after officials meet to discuss how they expand of the euro region’s new bailout fund. Timothy F. Geithner will become the first U.S. Treasury Secretary to attend a European finance ministers’ summit.

National benchmark indexes climbed in all 18 western European markets, except Greece. Germany’s DAX Index (DAX) advanced 3.7 percent, the U.K.’s FTSE 100 gained 2.5 percent and France’s CAC 40 climbed 3.4 percent.

Stocks extended gains after the ECB said it will lend dollars to euro-area banks to ensure they have enough of the U.S. currency through the end of the year. The Frankfurt-based central bank said that, in coordination with the Fed, the Bank of England, the Bank of Japan and the Swiss National Bank, it will conduct three dollar liquidity-providing operations with a maturity of approximately three months. The loans are in addition to the bank’s regular seven-day dollar offerings.

‘Improved Newsflow’
“A slightly improved newsflow on the euro zone and banks has been seized upon by investors,” said Ian Murrell, an analyst at Pritchard Stockbrokers Ltd. in London “Markets needed a rally and they got a reason for it.”

BNP Paribas (BNP), France’s biggest bank, soared 14 percent to 30.63 euros. Credit Agricole surged 6.4 percent to 5.55 euros and Italy’s Intesa Sanpaolo SpA (ISP) rose 9 percent to 1.04 euros. The Stoxx 600 Banks Index jumped 4.5 percent, the biggest gain in a month.

The banks gauge climbed even as UBS lost 8.4 percent to 10.01 Swiss francs after saying it discovered a loss due to unauthorized trades in its investment-banking unit. The firm said the “matter is still being investigated” and no client positions were affected.

London police arrested a 31-year-old man in connection with the probe. The employee detained was Kweku Adoboli, said a person familiar with the matter who requested anonymity. UBS declined to identify the man.

H&M, Kingfisher
H&M rallied 6.2 percent to 196.20 kronor after Europe’s second-largest clothing retailer reported sales that were better than anticipated. Revenue at stores and online sites open for at least a year was unchanged last month. Analysts surveyed by SME Direkt had anticipated a drop of 7.2 percent on that basis.

Kingfisher Plc (KGF) gained 4.9 percent to 251.4 pence after Europe’s biggest home-improvement retailer reported a 24 percent increase in first-half adjusted pretax profit to 439 million pounds ($692 million). That beat the average analyst estimate of 408 million pounds.

Luxury-goods makers climbed after the National Business Daily reported that China may issue a plan to cut taxes on the industry by the end of the year. Tariffs on cosmetics will be cut first and clothes and leather goods might follow, the newspaper said, citing an unidentified person familiar with the situation.

LVMH Moet Hennessy Louis Vuitton SA (MC), the world’s largest luxury-goods maker, increased 2.7 percent to 114.85 pence. Burberry Group Plc (BRBY) rallied 6.6 percent to 1,447 pence and Cie. Financiere Richemont SA rose 1.4 percent to 48.72 francs.

ArcelorMittal (MT) Advances

ArcelorMittal advanced 4.5 percent to 13.46 euros after Citigroup Inc. upgraded its recommendation for the world’s largest steelmaker to “buy” from “hold.”

Associated British Foods Plc (ABF) climbed 2.6 percent to 1,094 pence. The company, which this week said second-half earnings will meet its expectations, was upgraded by UBS to “buy” from “neutral.”

Jardine Lloyd Thompson Group Plc (JLT) rallied 7.1 percent to 663 pence after Jardine Matheson Holdings Ltd., a Hong Kong-based investment firm, agreed to raise its stake to 40 percent.

Aixtron SE sank 13 percent to 12.24 euros in Frankfurt after reducing its sales forecast for 2011 to 600 million euros to 650 million euros. The maker of equipment used to produce LED screens had a previous prediction of 800 million euros to 900 million euros.

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