More central bank stimulus on the way?

August 14, 2014 04:30 AM

European stocks advanced, reversing earlier losses, as data showing the euro area’s recovery stalled in the second quarter fueled speculation of more central bank stimulus.

ThyssenKrupp AG climbed 0.8% after posting quarterly earnings that beat projections. Royal Boskalis Westminster NV surged 8.5% after saying it will start a share buyback program. RWE AG declined 2.6% after saying first-half profit fell 62%. Novozymes A/S slid 8.3% after the supplier of enzymes reported second-quarter net income that trailed analyst estimates.

The Stoxx Europe 600 Index gained 0.2% to 330.74 at 1:44 p.m. in London, after earlier dropping as much as 0.4%. The benchmark gauge has fallen 1.6% this month amid crises in Ukraine, Iraq and the Gaza Strip.

“There’s a perception that the low-growth environment might push the European Central Bank into some form of further action,” Michael Hewson, a chief market analyst, at CMC Markets Plc in London, said by telephone. “Whether that perception is right is unclear, but the market believes further stimulus is on the way. That’s giving a positive bias to equity markets in Europe.”

The ECB in June cut the deposit rate to minus 0.1% and lowered the main refinancing rate to a record 0.15%. Policy makers next meet on Sept. 4.

Euro-region (CME:E6U14) gross domestic product in the three months through June was unchanged from the first quarter, when it increased 0.2%, Eurostat, the European Union’s statistics office in Luxembourg, said today. The median forecast in a Bloomberg News survey was for growth of 0.1%.

German Economy

Germany’s economy contracted last quarter more than expected, France failed to grow, while Italy fell into its third recession since 2008.

U.K. Monetary Policy Committee member David Miles said today that the Bank of England could keep rates at record-low levels for “a bit longer yet.” His comment follows BOE Governor Mark Carney’s yesterday that the Britain’s expansion faces challenges.

“Geopolitical concerns will always be there, but it’s ultimately about what central banks will do,” Hewson said. “Over the last 24 hours, it’s become more likely that we’ll get more from the ECB and that the prospects of higher interest rates from the Federal Reserve and BOE have been pushed further out.”

In the U.S., jobless claims climbed by 21,000 to 311,000 in the period ended Aug. 9, the highest in six weeks, a Labor Department report showed today in Washington. The median forecast of economists surveyed by Bloomberg called for 295,000.

National Indexes

National benchmark indexes advanced in 14 of 18 Western European markets. The U.K.’s FTSE 100 Index gained 0.4%, France’s CAC 40 rose 0.2%, and Germany’s DAX climbed 0.1%.

ThyssenKrupp added 0.8% to €21.13. Germany’s largest steelmaker posted a profit at its previously loss-making Steel Americas unit. Adjusted Ebit from continuing operations almost tripled to 398 million euros ($532 million) in the three months through June. Analysts had predicted €363.6 million. Sales in its fiscal third quarter rose 8.3% to 10.7 billion euros.

Boskalis Westminster surged 8.5% to €41.65 for its biggest gain since November 2010. The world’s largest dredging company said it will buy back as many as 10 million shares in the next 2 1/2 years. Boskalis also said first-half earnings before interest, taxes, depreciation and amortization jumped to €466 million from €280 million a year ago.

United Internet

United Internet AG rallied 6.2% to €31.67. First-half sales increased 12% from a year earlier to €1.43 billion. Ebitda climbed 36% to €237.6 million.

TUI AG rose 5.8% to €11.13. Operating profit at the owner of Europe’s largest tour operator jumped 89% in the third quarter as it cut costs, raised prices and improved hotel booking levels.

Carillion Plc jumped 8.2% to 346.3 pence after saying it has met with Balfour Beatty Plc’s major shareholders in an effort to resurrect a merger that Britain’s largest builder rejected this week. Balfour Beatty rose 1.5% to 240 pence, as it said that it still opposes the proposal.

RWE slid 2.6% to €28.55. Recurrent net income, the measure used to calculate dividends, dropped to €749 million in the six months ended June 30 from €1.99 billion a year earlier. That missed the 790 million-euro average analyst estimate. Sales fell 9.6% to €25.1 billion.

Novozymes Falls

Novozymes dropped 8.3% to 254.90 kroner, its biggest decline in three years. The Danish company reported second- quarter net income of 591 million kroner ($106 million), trailing analysts’ projections of 608 million kroner. Sales during the period also fell short of estimates.

GN Store Nord A/S retreated 3.6% to 137.60 kroner. The Danish hearing-aid maker reported second-quarter net income of 190 million kroner, missing the 216 million kroner estimated by analysts.

William Demant Holding A/S slid 5.6% to 465.80 kroner. The hearing-aid maker reported first-half earnings before interest and taxes of 834 million kroner, falling short of the 920 million kroner forecast by analysts.

About the Author