European stocks gained, extending the Stoxx Europe 600 Index’s biggest rally in three weeks, as investors awaited interest-rate decisions from the European Central Bank and the Bank of England. U.S. futures and Asian shares advanced.
European banks rose as investors speculated that the ECB may announce support measures for financial markets. Home Retail Group Plc (HOME) rallied more than 4 percent after saying the sales decline at its Argos chain slowed. Syngenta AG (SYNN) and Givaudan SA (GIVN) both dropped more than 1 percent, after Morgan Stanley recommended selling their shares.
The Stoxx 600 climbed 0.9 percent to 230.85 at 11:26 a.m. in London, as more than five shares gained for every stock that fell, erasing an earlier decline of as much as 0.6 percent. The gauge has still tumbled 21 percent from this year’s high in February as concern grew that Europe’s debt crisis is harming the economic recovery. The decline has cut the index’s valuation to 9.7 times estimated earnings, near the cheapest since March 2009, according to data compiled by Bloomberg.
“The market is awaiting rate decisions at the Bank of England and the ECB and what Trichet says on the economy,” said Morten Johannsen, a senior equities trader at Aabenraa, Denmark- based Sydbank A/S. “It’s the big macroeconomic events that govern the direction of the market, including Obama’s and Bernanke’s speeches in the U.S. after the European close.”
Futures on the Standard & Poor’s 500 Index expiring this month rose 0.2 percent, while the MSCI Asia Pacific Index advanced 0.3 percent.
Obama’s Jobs Plan
Equities rallied around the world yesterday as investors speculated that President Obama will introduce a $300 billion plan to create more jobs in a speech to Congress today. Obama will propose a stimulus plan in the Republican-controlled House chamber as job growth stalls and the unemployment rate hovers above 9 percent.
ECB President Jean-Claude Trichet will probably resist calls to cut the benchmark interest rate today and may opt instead to increase the supply of cash to euro-area banks as the region’s debt crisis worsens.
BNP Paribas (BNP) SA rose 4.4 percent to 33.02 euros and Banco Popolare di Milano Scrl jumped 3.6 percent to 1.37 euros as a gauge of European banks advanced 2.1 percent, the biggest gain of 19 industry groups in the Stoxx 600.
Policy makers meeting will announce their decision at 1:45 p.m. in Frankfurt. They will keep interest rates at 1.5 percent, according to all 57 economist estimates in a Bloomberg News survey. The ECB may lower its inflation and growth forecasts, signaling rates are now on hold after two increases this year.
U.K. Interest Rates
BOE policy makers may consider the need for more stimulus today in case global market strains worsen, setting aside inflation risks as the recovery threatens to unravel.
While a poll of economists shows that the central bank will keep its bond plan unchanged, Goldman Sachs Group Inc. and Citigroup Inc. say policy makers will resume asset purchases by November. The central bank will keep its benchmark interest rate at a record low, according to all 57 economists in a Bloomberg News survey.
KBC Groep NV (KBC) surged 7.9 percent to 17.85 euros after Polish newspaper Dziennik Gazeta Prawna reported that Banco Santander SA (SAN), Spain’s biggest bank, seeks to buy KBC’s Polish unit Kredyt Bank SA. The paper did not say where it got the information. Santander wants KBC to abandon the bidding process and enter direct negotiations, according to the Polish newspaper, which cited no one. Santander rose 3 percent to 5.93 euros in Madrid.
Home Retail Rallies
Home Retail jumped 4.8 percent to 121 pence after reporting that sales fell 8.6 percent in the 13 weeks ended Aug. 27, a slower pace than the 9.6 percent decline in its fiscal first quarter.
Syngenta, the biggest producer of crop-protection chemicals, declined 1.7 percent to 253 Swiss francs as Morgan Stanley lowered its rating on the shares to “underweight” from “equal weight.” Givaudan, the maker of fragrances for Marc Jacobs’s Lola and Paco Rabanne’s 1 Million perfumes, also slid 1.4 percent to 805 francs after being downgraded to underweight by Morgan Stanley.
Danone, the world’s biggest yogurt maker, declined 3 percent to 45.12 euros after Barclays Plc wrote that the company predicts its third quarter will “be tougher” than the first half of the year.
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