Saturday, October 22, 2011

Stocks Advance in Europe Before Euro Area Debt-Crisis Summit; Valeo Jumps

European stocks advanced, with the Stoxx Europe 600 Index completing its longest stretch of weekly gains this year, as policy makers discussed deploying $1.3 trillion in funds to help contain the euro area’s debt crisis.

Banks and mining companies rebounded from their biggest selloffs in more than two weeks. Valeo SA (FR) rose 6.6 percent after reporting an increase in sales. Lundin Petroleum AB surged 9.8 percent after Statoil ASA doubled its estimate of an oil discovery in the North Sea.

The Stoxx 600 advanced 2.5 percent to 238.93 at the close in London. The benchmark measure extended gains after Fitch Ratings said it has no plans to change France’s AAA sovereign credit rating. The gauge rose 0.2 percent this week, its fourth week of gains for the longest weekly winning streak since last December.

“The markets want a three- or four-point plan that is credible and offers a long-term solution to the crisis,” said Sailesh Bhundia, a London-based senior portfolio manager at EFG Asset Management, which oversees about $6.5 billion. “People want to feel bullish, but they can’t with this political overhang.”

U.S. stocks erased losses in late afternoon trading yesterday and the euro rose after two people familiar with the matter said the euro area may combine its temporary and permanent rescue funds to pool as much as 940 billion euros ($1.3 trillion).

That option may be one way out of the impasse between the euro region’s two biggest economies. Finance ministers are meeting in Brussels today to lay the groundwork for the Oct. 23 meeting of government leaders.

Second Summit
A second summit for Oct. 26 was set yesterday after Germany and France said the European Union needs more time to seal a “global and ambitious” accord. In Greece, Prime Minister George Papandreou won a parliamentary vote on further austerity measures designed to secure more aid under the 2010 bailout.

The Stoxx 600 completed its fourth week of gains as concern eased that Europe’s leaders remain far from agreeing on a strategy to contain the crisis. France and Germany disagree over the role of the European Central Bank and Chancellor Angela Merkel canceled a speech to German parliament scheduled for today.

“Investors are finding it difficult to model the behavior of politicians,” said EFG’s Bhundia. “There is still a lot of cash on the sidelines. People are holding tight to see where Europe leads.”

National benchmark indexes rallied in every western- European market, except Luxembourg. The U.K.’s FTSE 100 Index (UKX) climbed 1.9 percent, France’s CAC 40 Index increased 2.8 percent and Germany’s DAX Index jumped 3.6 percent.

UniCredit, Santander Gain
UniCredit SpA (UCG) surged 6.6 percent to 90.2 euro cents, Banco Santander SA (SAN) rose 2.9 percent to 6.03 euros and Societe Generale SA gained 5.6 percent to 18.97 euros as a gauge of Europe’s lenders rebounded from yesterday’s 4 percent selloff which was the biggest decline since Oct. 4.

Kazakhmys Plc (KAZ) added 3.1 percent to 856.5 pence, Rio Tinto Group climbed 4.5 percent to 3,151 pence and Antofagasta Plc (ANTO) increased 5.5 percent to 1,096 pence as copper rose for the first time in five days in London. Zinc and lead also climbed. A gauge of commodity companies tumbled 3.6 percent yesterday, its steepest retreat since Oct. 4.

Valeo advanced 6.6 percent to 35.85 euros after France’s second-largest auto-parts maker confirmed its 2011 guidance and reported a 14 percent increase in third-quarter revenue to 2.66 billion euros. Chief Executive Officer Jacques Aschenbroich said the company forecasts continued growth in 2012.

Lundin, Neste Oil
Lundin surged 9.8 percent to 156.20 kronor after Statoil doubled its estimate for a North Sea discovery. The Aldous Major South find may hold 900 million to 1.5 billion barrels of recoverable oil equivalent, twice as much as Statoil’s previous estimate. Combined with Lundin’s neighboring Avaldsnes, the field holds as much as 3.3 billion barrels of recoverable resources.

Neste Oil Oyj (NES1V) rallied 5.7 percent to 7.83 euros after Credit Suisse Group AG raised its recommendation for the Finnish oil refiner to “outperform” from “neutral.”

Thomas Cook Group Plc (TCG), Europe’s second-largest tour operator, soared 13 percent to 51.5 pence after the company’s banks relaxed loan conditions and agreed to provide additional short-term funds.

Scania Rises
Scania AB (SCVB) gained 5 percent to 107.60 kronor after the Swedish truckmaker reported a 2 percent increase in third- quarter profit to 2.34 billion kronor ($356 million), beating analysts’ estimates. Sales rose 14 percent.

Safran SA (SAF) plunged 8 percent to 22.20 euros, for the biggest drop in the Stoxx 600, after demand for spare parts came in at the bottom end of its forecast for the full year of 10 percent to 15 percent. The maker of jet engines today reported a 5.2 percent gain in third-quarter sales to 2.73 billion euros.

Ericsson AB lost 2 percent to 66.75 kronor after Evolution Group Plc lowered its recommendation for the world’s largest maker of wireless networks to “neutral” and Svenska Handelsbanken AG said Ericsson’s shares lack “meaningful upside.”

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