Europe stocks climb as German consumer confidence beats forecast

November 27, 2013 04:36 AM
U.S.labor, durable goods reports provide good news for Europe

European stocks climbed as a measure of German consumer confidence rose more than estimated and investors weighed U.S. reports on durable-goods orders and jobless claims.

Royal Mail Group Ltd. jumped the most in five weeks after the U.K. postal service that listed its shares in October said first-half earnings almost doubled. Vivendi SA advanced 1.3% after saying it will replace its chairman once it spins off its wireless business. Accor SA dropped the most in 17 months after saying it will separate the operation and ownership of hotels into two businesses.

The Stoxx Europe 600 Index gained 0.6% to 324.12 at 3:13 p.m. in London. The gauge has climbed 0.5% so far this month as the European Central Bank cut its benchmark interest rate to a record low, offsetting concern the Federal Reserve may start paring its stimulus sooner than forecast.

“Equities are the only serious asset at this moment because of central-bank policy stances,” Percival Stanion, the London-based head of the multi-asset group at Baring Asset Management, which manages about $60 billion, said by telephone. “Whatever their valuation point, they’re likely to get more expansive over the next couple of years. You could have short term setbacks because of tapering or other policy maneuvers, but central banks won’t be trying to slow economic growth.”

National benchmark indexes rose in all 18 western-European markets. The U.K.’s FTSE 100 increased 0.3% and France’s CAC 40 rose 0.5%. Germany’s DAX jumped 0.7%.

Consumer sentiment

A release from Nuremberg-based research company GfK AG showed German consumer confidence will climb to 7.4 in December from a revised 7.1 this month. That beat the median estimate in a Bloomberg survey that called for an increase to 7.1 from an earlier November reading of 7.

In the United States, data showed the final reading of the Thomson Reuters/University of Michigan consumer sentiment index rose to 75.1 in November from 73.2 in October. That exceeded the decline to 73.1 estimated by economists in a Bloomberg survey.

A report from the Commerce Department in Washington showed durable-goods orders fell 2% in October, matching the median forecast of economists in a Bloomberg survey, after rising 4.1% in the prior month.

A separate report showed first-time jobless claims in the week ended Nov. 23 declined to 316,000, the fewest in two months. The median forecast in a Bloomberg poll called for an increase to 330,000.

German coalition

In Germany, Chancellor Angela Merkel reached a coalition agreement with the Social Democrats early today. The pact put her on track for a third term leading Europe’s biggest economy until 2017. It also signaled Merkel will continue her European policies including a rejection of joint liability for euro-area nations’ debt. The deal must pass a referendum among the 470,000 members of the SPD.

Royal Mail jumped 6.9% to 570 pence, its biggest gain since Oct. 23. The company said demand from online retailers for parcel deliveries helped increase operating profit after some costs by 97% to 283 million pounds ($461 million) in the six months ended Sept. 29.

Vivendi gained 1.3% to 18.83 euros after saying shareholder Vincent Bollore will replace Chairman Jean-Rene Fourtou once the telecommunications business is split from the media assets. The spinoff may entail distributing shares of its SFR mobile-phone unit to shareholders, the company said. Bollore owns 5% of Vivendi.

Profit outlook

Compass Group Plc advanced 1.7% to 942 pence, the highest price since it sold shares to the public in February 2001. The world’s biggest catering company said it expects profit margins to improve this year as it posted full-year adjusted pretax profit that beat projections.

Assicurazioni Generali SpA rose 2.1% to 16.93 euros. Europe’s third-largest insurer plans to cut an extra 150 million euros ($204 million) of costs by 2015 and reduce debt as part of a plan to boost profit and strengthen capital.

Aker Solutions ASA rallied 8.7% to 107.5 kroner, the highest price since April. Billionaire Kjell Inge Roekke’s investment firm Aker ASA bought 16.4 million shares of the Norwegian oil-services company at 115 kroner a share, 16% more than yesterday’s closing price.

Colruyt SA climbed 6% to 42.04 euros, for its largest increase in five months. Belgium’s biggest discount food retailer late yesterday posted first-half revenue and net income that exceeded forecasts.

Accor reorganization 

Accor dropped 6.8% to 31.29 euros, its biggest decline since June 2012. Europe’s largest hotel operator said it will reorganize its business into two separate units. The HotelServices unit will operate about 460,000 hotel rooms under 14 brands. The HotelInvest unit will act as the owner and investor in hotels.

De La Rue Plc tumbled 7.5% to 847.5 pence. Citigroup Inc. cut its rating for the banknote printer to neutral from buy, citing a price war in the currency market.

Solvay SA fell 2.4% to 111.1 euros. The chemical maker lowered its forecast for earnings before interest, taxes, depreciation and amortization in 2016 to no more than 2.5 billion euros, from a previous prediction of 3 billion euros.

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