European stocks advanced for a second day amid speculation the outlook for the global economy is not as bad as feared. Asian shares climbed while U.S. index futures fell.
Royal Bank of Scotland Group Plc (RBS) and Barclays Plc (BARC) led a rally in U.K. lenders. Ipsen SA (IPN), the French maker of a Botox rival, soared 8.6 percent after reporting increased profit. Bunzl Plc (BNZL), the world’s biggest distributor of disposable tableware and food packaging, added 4.5 percent after earnings also advanced.
The Stoxx Europe 600 Index rose 0.7 percent to 229.91 at 11:16 a.m. in London. The gauge has still tumbled 13 percent this month, the biggest drop since September 2002, as European and U.S. economic reports trailed forecasts, adding to concern that the economic recovery is at risk. The decline has left the measure trading at about 9.6 times estimated earnings, near the cheapest since March 2009, data compiled by Bloomberg show.
“Given the sharp drop in equities in August, I think even a moderate recession is now priced in and should not scare investors,” said Mikio Kumada, a global strategist at LGT Capital Management in Singapore. “Even very sluggish growth will now suffice for equities to find a bottom and even rally for a while, though it will take time for the markets to reclaim old highs.”
The MSCI Asia Pacific Index rose 1 percent, while Standard & Poor’s 500 Index futures fell 0.6 percent.
U.K. Leads Advance
Today’s gains in the Stoxx 600 were led by U.K. equities that missed out on yesterday’s rally because of a holiday. The Euro Stoxx 50 Index of the biggest companies in the euro area, which excludes British shares, lost 0.5 percent, while the U.K.’s FTSE 100 Index rallied 2.2 percent.
The Federal Reserve will release minutes from its most recent policy meeting after European markets close today. Chairman Ben S. Bernanke said on Aug. 26 in Jackson Hole, Wyoming, that the economy isn’t deteriorating enough to warrant any immediate stimulus and the central bank still has tools to stimulate growth.
A report at 10 a.m. New York time may show a gauge of consumer confidence in the world’s largest economy weakened to 52 in August from 59.5 the previous month, according to a Bloomberg survey of economists.
“In the short-term, the markets can still continue the relief rally,” said Manfred Hofer, senior investment analyst at LGT Capital Management AG in Pfaeffikon, Switzerland. “Going forward, however, old topics such as the European debt crisis or fears of recession will move into focus again.”
Greek Aid Deal
European governments will seal an agreement on collateral for Greece’s second aid package by mid-September, Luxembourg Prime Minister Jean-Claude Juncker said late yesterday in Brussels. Euro-area governments will need to transfer additional sovereign functions to the European Union if they want to establish an economic government, he told German state broadcaster ZDF in an interview.
Italian Prime Minister Silvio Berlusconi agreed to overhaul the 45 billion-euro ($66 billion) austerity plan that persuaded the European Central Bank to support Italy’s bonds, dropping a tax on the highest earners and limiting funding cuts to regional governments. The new version of the package, which is due to be voted on by the Senate next week, drops the “solidarity tax” of an additional 5 percent on income of more than 90,000 euros a year, rising to 10 percent for income above 150,000 euros, Berlusconi’s office said.
RBS, Britain’s biggest government-controlled bank, jumped 7.7 percent to 23.57 pence and Barclays surged 6.4 percent to 164.90. Lloyds Banking Group Plc (LLOY), the nation’s largest mortgage lender, rose 5.7 percent to 31.41 pence.
Jason Napier and David Lock, analysts at Deutsche Bank AG, upgraded RBS to “buy” from “hold”, writing in a report that last month’s drop was overdone and they “expect strong management will continue to deliver value and earnings and capital formation will surprise positively.” They also named Barclays as their top pick.
Alpha Bank SA advanced 2.4 percent to 2.53 euros, extending yesterday’s rally, while EFG Eurobank Ergasias SA (EUROB) tumbled 16 percent to 1.88 euros. Both banks jumped by the allowed daily limit of 30 percent yesterday after announcing a merger.
“The merger is a sign that the Greek banking sector is alive, that it is working on its future,” said LGT’s Kumada. “It may signal the start of a wider restructuring and consolidation in one of the weakest economies in Europe. It creates hope that others will soon follow in the euro area.”
Ipsen, Bunzl Gain
Ipsen rallied 8.6 percent to 24.04 euros, the biggest gain since January, after reporting first-half net income that rose 22 percent to 91.7 million euros. The average analyst estimate was 78.8 million euros. The company also said it’s targeting recurring adjusting operating income, excluding currency movements, of between 190 million and 200 million euros in 2011.
Bunzl gained 4.5 percent to 754.50 pence after the company said first-half pretax profit increased 12 percent to 112.1 million pounds ($184 million) on higher revenue. Bunzl also said that it agreed to buy Majestic Products BV, a Netherlands-based personal-protection equipment business.
Anglo American Plc (AAL), part owner of the world’s biggest platinum and diamond producers, climbed 5.8 percent to 2,472 pence and Antofagasta Plc (ANTO), the copper producer controlled by Chile’s Luksic family, gained 5.6 percent to 1,275 pence. A gauge of European basic-resources companies was the best performer in the Stoxx 600. Xstrata Plc (XTA) added 4.4 percent to 1,023 pence, while BHP Billiton Ltd. (BHP), the world’s largest mining company, increased 4 percent to 2,037.50 pence.
Chemring Group Plc (CHG) jumped 4.3 percent to 540 pence after the U.K. maker of missile-avoidance gear said it remains on course to meet its full-year outlook after revenue in the three months through July jumped 33 percent.
Public Power Corp SA (PPC), Greece’s biggest electricity producer, plunged 11 percent to 6.08 euros, its biggest drop since September 2008, after first-half profit fell to 128.8 million euros from 347.9 million euros a year ago.
Baloise Holding AG (BALN), Switzerland’s third-largest insurer, dropped 3.5 percent to 68.55 Swiss francs. Net income in the first six months of the year slipped 2.4 percent to 203.3 million francs ($249 million) as the Swiss currency strengthened against the euro.
Marine Harvest ASA (MHG), the world’s biggest salmon farmer, lost 2 percent to 3.10 kroner. Norwegian salmon exports to the U.S. declined 67 percent since the beginning of the year, Oslo-based newspaper Finansavisen reported, without saying where it got the information.