It News: European Stocks Advance After Spanish Stress-Test Results

European Stocks Advance After Spanish Stress-Test Results

Bloomberg News
By Tom Stoukas on October 01, 2012

European stocks advanced the most in two weeks as test results showed the stress to the Spanish banking system was less than estimated, outweighing weakening economic data from Asia. U.S. index futures climbed, while Asian shares fell.

Credit Agricole SA (ACA) rose 3.7 percent after starting talks to sell its unprofitable Greek unit. International Consolidated Airlines Group SA (IAG) climbed 1.7 percent after the International Air Transport Association raised its 2012 global airline-profit forecast. Banco Popular Espanol SA slumped the most in almost 15 years after announcing a capital-increase plan.

The Stoxx Europe 600 Index (SXXP) gained 0.9 percent to 270.85 at 11:35 a.m. in London. The benchmark gauge rallied 6.9 percent in the quarter ended Sept. 30 as the Federal Reserve and European Central Bank started bond-buying programs. The measure slid 1.2 percent on Sept. 28. Standard & Poor’s 500 Index futures added 0.4 percent today, while the MSCI Asia Pacific Index retreated 0.4 percent.

“European markets have begun the fourth quarter on a surprisingly positive note,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London. “Although the political and economic situation in Spain is extremely precarious, and manufacturing and labor market conditions across Europe remain bleak, investors are taking comfort from the fact that things could be worse.”

European stocks last week posted their biggest weekly decline since the start of June amid rising Spanish sovereign- bond yields and concern that U.S. stimulus will fail to promote growth in the world’s largest economy.

Capital Deficit
Spain’s banks have a capital deficit of 59.3 billion euros ($76 billion), stress tests conducted by New York-based management consultancy Oliver Wyman showed last weekend. That was less than the 62 billion euros Wyman estimated in June that the lenders would need.

Spain commissioned the stress test as part of terms to obtain a European bailout of as much as 100 billion euros for its banks after more than 180 billion euros of losses linked to real-estate loans. Wyman tested the banks’ ability to handle an extreme scenario -- a three-year economic contraction -- even as the government debated whether to seek a wider rescue package.

“There wasn’t a bad surprise but the stress test results were anticipated by the market,” said Amandine Gerard, president of Financiere de L’Arc in Aix-en-Provence, which oversees $235 million. “If the market is holding up today, it’s because it is a technical rebound following last week’s losses, and it is the start of the month.”

Asian Economy
A Chinese factory index came in at 49.8 for September, the first time it fell below 50 for two straight months since 2009, a statistics bureau report showed in Beijing. Japan’s Tankan index of large manufacturers’ confidence fell to minus 3 for the past quarter. South Korean shipments slid for a third month.

In the euro area, the jobless rate reached the highest on record, a report showed today.

Unemployment was 11.4 percent in August, the same as in June and July after those months’ figures were revised higher, the European Union’s statistics office in Luxembourg said. That’s the highest since the data series started in 1995 and in line with median of 30 economists’ forecasts in a Bloomberg News survey.

Analysts are lowering estimates for European earnings growth by 52 percent, even as equity valuations soared to a 2 1/2-year high.

More than 12,000 estimates compiled by Bloomberg show net income will grow 13 percent next year, down from the 27 percent forecast in January. The Euro Stoxx 50 Index (SX5E), a benchmark for the euro area, is trading at 9.5 times next year’s projected profit, near the highest since April 2010.

Emporiki Sale
Credit Agricole rallied 3.7 percent to 5.57 euros. France’s third largest bank started exclusive talks to sell Emporiki Bank, its unprofitable Greek unit, to Alpha Bank SA for a token price of 1 euro.

Alpha Bank jumped 6.6 percent to 1.77 euros, the highest since Feb. 21.

Credit Suisse rose 2.5 percent to 20.42 Swiss francs. Barclays Plc (BARC) gained 2.8 percent to 220.9 pence. A gauge of European lenders advanced 1.3 percent, one of the best performances among the 19 industry groups on the Stoxx 600.

IAG, the parent of British Airways, climbed 1.7 percent to 151.5 pence. IATA raised its 2012 global airline-profit forecast 37 percent as carriers slow capacity growth to cope with higher fuel prices and waning travel demand.

Air France-KLM Group, Europe’s biggest airline, added 2.7 percent to 5.18 euros. Deutsche Lufthansa AG, the region’s second largest, rose 1.6 percent to 10.72 euros.

Transocean Order

Transocean Ltd, the world’s biggest offshore driller, jumped 4.4 percent to 43.78 francs after the Brazilian Supreme Court halted an order that required the company’s rigs to stop operating in the country within 30 days. This decision allows Transocean to continue to operate its rigs in all blocks offshore Brazil, except the Campo de Frade field that is contracted by Chevron Corp.

Xstrata Plc (XTA) rose 3.1 percent to 986.7 pence after its board recommended shareholders vote in favor of a $33 billion sweetened takeover offer by Glencore International Plc. (GLEN) The decision came after gaining assurances over the combined company’s board and separating the approval of incentive payments from a vote on the offer.

Arkema SA, a French maker of industrial chemicals gained 3.7 percent to 75.55 euros. The company may see a gain in earnings-per-share due to a “highly likely” increase in acrylic acid prices after a Sept. 29 explosion at Nippon Shokubai Co.’s plant, Bank of America Corp. said in a report.

Finmeccanica, Michelin
Finmeccanica SpA rose 3.5 percent to 3.83 euros. Fondo Strategico Italiano made an offer for Finmeccanica’s Ansaldo Energia to counter a bid from Siemens AG, Il Sole 24 Ore reported, without citing anyone. Siemens had offered around 1.3 billion euros for the power-plant unit, Sole reported.

Michelin & Cie, (ML) the world’s second-largest tiremaker, advanced 3.4 percent to 63.06 euros. UBS AG upgraded the shares to buy from neutral.

Banco Popular (POP) tumbled 13 percent to 1.48 euros, the biggest slump since Oct. 28, 1997. Trading in the shares started at 11 a.m. in Madrid after a suspension by Spain’s stock-market regulator. The bank said it will seek to raise as much as 2.5 billion euros from a share sale as it tries to cover a capital shortfall identified by the stress tests.

Alcatel-Lucent SA, the phone-equipment supplier, dropped 2.1 percent to 84.1 euro cents. UBS downgraded the stock sell from neutral, saying that the company’s third-quarter losses may be wider than expected.