Monday, August 29, 2011

European Stocks Rise Before U.S. Spending Data

European stocks rose after two days of losses dragged equities near to the cheapest valuation in more than two years and as investors awaited a report that may show U.S. consumer spending gained. Asian shares and U.S. index futures climbed.

National Bank of Greece SA (ETE) and Piraeus Bank SA (TPEIR) jumped at least 29 percent as EFG Eurobank Ergasias SA (EUROB) and Alpha Bank SA met to discuss a merger. Munich Re and Swiss Re Ltd., the world’s biggest reinsurers, gained more than 3 percent as the damage from Hurricane Irene in the U.S. was less severe than estimated. ProSiebenSat.1 Media AG (PSM) soared 4.4 percent after the German company said it will buy back shares.

The Stoxx Europe 600 Index advanced 0.9 percent to 227.48 at 11:21 a.m. in London. The gauge has still fallen 22 percent from this year’s peak on Feb. 17 as European and U.S. economic reports trailed forecasts, adding to concern that the global economic recovery is at risk. The decline has left the measure trading at 9.5 times estimated earnings, near the cheapest since March 2009, data compiled by Bloomberg show.

The index advanced for the first week in five last week as Federal Reserve Chairman Ben S. Bernanke indicated the economy isn’t deteriorating enough to warrant any immediate stimulus. He said a second day has been added to the next policy meeting in September to “allow a fuller discussion” of the economy and the Fed’s possible response.

More Action
“The interpretation of equity markets to Bernanke’s speech is positive,” said Matthias Jasper, head of equities at WGZ Bank AG in Dusseldorf. “He left the door open for more action. It’s not the best entry point, but it’s a good entry point if you’re not invested so far.”

The MSCI Asia Pacific Index gained 1.6 percent today, while Standard & Poor’s 500 Index futures rose 1.1 percent. The U.K. market is closed for a holiday today.

Investors are paying less for U.S. equities than they have during every recession since Ronald Reagan was president amid growing concern that the economy is on the edge of another recession. The S&P 500 has lost 13 percent in the past five weeks, sending its price-earnings ratio down to 12.9. That’s 3.5 percent less than the average multiple during the 10 contractions since 1949 and a level last reached in 1982, according to data compiled by Bloomberg.

Jackson Hole

As central bankers gathered at an annual retreat in Jackson Hole, Wyoming, this weekend, Bernanke urged adoption of “good, proactive housing policies” to reverse the depressed U.S. real estate market and warned lawmakers to avoid steps that may hurt short-term growth. Ewald Nowotny of the European Central Bank Governing Council said euro-area governments should expand the powers of their regional bailout fund.

Bernanke told the conference that the U.S. central bank still has a “range of tools” it could use to help the economy if needed, although he stopped short of signaling that the Fed would embark on a third round of government bond buying.

The U.S. won’t slip into recession after Bernanke said the central bank has more tools to support growth if needed, said Templeton Asset Management’s Mark Mobius.

“We have no interest-rates risk in America in the short and long term,” said Robert Halver, chief strategist at Baader Bank AG in Frankfurt. “New economic programs could be launched with such low interest rates. From a fundamental point of view it’s a good entry point but it’s all about politics. Bernanke can’t disappoint in September.”

U.S. Economy

A report today may show U.S. consumer spending climbed in July. Purchases rose 0.5 percent after a 0.2 percent decline the prior month, according to the median estimate of 64 economists surveyed by Bloomberg News. Another report may show contract signings for sales of existing homes fell last month.

National Bank of Greece, the country’s largest bank, surged 30 percent to 3.61 euros while Piraeus Bank jumped 29 percent to 72 euro cents. A surge in banking shares led Greece’s benchmark ASE Index to the biggest gain in 20 years. The gauge jumped 11 percent, rebounding from the lowest level since 1996.

Eurobank and Alpha Bank were suspended from trading as the boards of Greece’s second- and third-biggest banks met to discuss a possible merger aimed at bolstering their assets and helping them ride out a deepening recession and the country’s debt crisis. A joint press conference will be held at 2 p.m. in Athens, the banks said.

Munich Re and Swiss Re gained 3.1 percent to 88.37 euros and 3.5 percent to 41.10 Swiss francs, respectively.

Irene Cost
Hurricane Irene’s estimated cost to insurers fell to about $2.6 billion in the U.S. as the storm lost strength en route to New York, according to Kinetic Analysis Corp., a firm that predicts the effects of disasters. That compares with a projection last week from the Silver Spring, Maryland-based company of as much as $14 billion.

Construction companies posted the best performance among 19 industry groups in the Stoxx 600 as Holcim Ltd. (HOLN), the world’s second-biggest cement maker, rallied 3.3 percent to 47.80 francs.

ProSiebenSat.1 Media soared 4.4 percent to 12.33 euros as Germany’s biggest private broadcaster said it will repurchase up to 2.5 million non-voting, preferred shares.

Banco Popolare SC (BP) added 2.2 percent to 1.15 euros as Italy’s fifth-biggest bank approved a plan to merge some units into the holding company as part of measures to increase efficiency and reduce costs. The lender said second-quarter net income fell 63 percent to 131.4 million euros.

Roche Holding AG (ROG) rose 1.2 percent to 138.1 francs. The company said it expects government austerity measures to boost its medical-diagnostics unit in the next three to five years thanks to broader use of tests to see which patients should use expensive treatments.

Landi Renzo SpA (LR) slid 5.1 percent to 1.61 euros as BofA Merrill Lynch Global Research downgraded the Italian maker of injection systems for alternative fuels to “underperform” from “buy.” Intermonte SIM SpA also cut its recommendation on the stock to “underperform.”

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