European stocks advanced for a second week as investors speculated that the European Union will increase its efforts to contain the region’s debt crisis.
Banking shares posted their best weekly performance in six months. Danisco A/S jumped 25 percent as DuPont Co. agreed to buy the company. Provident Financial Plc surged 13 percent after saying 2010 earnings may exceed analysts’ projections.
The benchmark Stoxx Europe 600 Index gained 1 percent this week as Portugal, Spain and Italy completed debt sales. The gauge rallied 8.6 percent in 2010 as the European Union bailed out Greece and Ireland, companies reported increased profits and the Federal Reserve unveiled $600 billion of additional bond purchases to support the economy.
“The first test of the ability of the euro-area peripheral countries to secure financing on the market has been passed,” a team of economists at Intesa Sanpaolo SpA, including Luca Mezzomo and Paolo Mameli, wrote in a report. “The fears over the outcome of the January auctions in Portugal, Spain and Italy proved unfounded.”
Portugal sold 599 million euros ($800.1 million) of 10-year bonds at an average yield of 6.716 percent this week, compared with a yield of 6.806 percent at the previous sale on Nov. 10.
In Spain, demand and borrowing costs increased at a 3 billion-euro sale of five-year notes. Investors bid for 2.1 times the securities on offer, up from 1.6 the last time Spain sold the debt on Nov. 4. The average yield climbed to 4.542 percent from 3.576 percent.
Japanese Finance Minister Yoshihiko Noda said “it’s appropriate” for his nation to buy bonds issued by Europe’s financial-aid funds later this month. China has also voiced support for Europe, with Vice Premier Li Keqiang last week expressing confidence in Spain’s financial markets and pledging to buy more of that country’s debt.
EU officials are trying to forge a “comprehensive” plan to contain the currency area’s sovereign-debt crisis, Economic and Monetary Commissioner Olli Rehn said this week. German Finance Minister Wolfgang Schaeuble said EU member states will assemble a “comprehensive package” to tackle the sovereign- debt crisis by March.
European stocks trimmed some of their gains as the People’s Bank of China told the country’s major lenders to increase their reserve ratios by 50 basis points from Jan. 20. China raised its benchmark interest rates on Christmas Day to rein in liquidity.
German, Euro-Area Inflation
Separately, inflation in Germany, Europe’s largest economy, accelerated to the fastest pace in more than two years in December, data from the Federal Statistics Office in Wiesbaden showed. European Central Bank council member Axel Weber said euro-area inflation risks “could well move to the upside” as the region’s economic outlook has improved markedly.
Euro-area inflation accelerated to 2.2 percent in December, exceeding the ECB’s 2 percent limit for the first time in more than two years.
The central bank kept interest rates at a record low as ECB President Jean-Claude Trichet said inflation pressures in the euro region have picked up. The Governing Council set the benchmark rate at 1 percent for the 21st month, as predicted by all 53 economists in a Bloomberg News survey. The Bank of England also kept its key rate unchanged at 0.5 percent.
National benchmark indexes rose in 15 of Europe’s 18 western markets. France’s CAC 40 Index gained 3 percent, the U.K.’s FTSE 100 Index rose 0.3 percent, while Germany’s DAX Index advanced 1.8 percent. Spain’s IBEX 35 Index jumped 8.6 percent, while Italy’s FTSE MIB Index surged 4.5 percent.
Europe’s Banks
European banking shares jumped 6.2 percent this week, their biggest weekly gain since July and the best performance among 19 industry groups in the Stoxx 600. Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA, Spain’s biggest banks, jumped 13 percent and 16 percent, respectively. UniCredit SpA advanced 12 percent. Banco Comercial Portugues SA advanced 5.4 percent, the stock’s first weekly gain in more than a month.
Danisco soared 25 percent as DuPont agreed to acquire the world’s largest maker of food ingredients for $5.8 billion, adding the production of enzymes used in food and biofuels to its range of businesses.
ARM Holdings Plc rallied 15 percent as Compal Electronics Inc., the world’s second-largest maker of notebook computers, forecast that 90 percent of the 3.8 million tablet devices it ships this year will use chips from ARM alongside Google Inc.’s Android operating system.
Provident Financial, Sky
Provident Financial, the U.K.’s biggest listed subprime lender, jumped 13 percent, the largest weekly gain in 2 1/2 years.
“The group had a strong finish to 2010 and expects to report results slightly ahead of market expectations,” Chief Executive Officer Peter Crook said. The company will report earnings on March 1.
Sky Deutschland AG rose 25 percent after the company reached an agreement with News Corp. to raise 400 million euros in financing, more than the 340 million euros it had previously sought. Sky Deutschland also predicted that 2011 earnings before interest, taxes, depreciation and amortization will be “significantly better than 2010, but will remain negative.”
Oriflame Cosmetics SA led falling shares in the Stoxx 600, losing 11 percent, as the maker of cosmetics said fourth-quarter sales were “slightly weaker than expected.”
Tesco Plc fell 5.6 percent after Britain’s biggest retailer reported holiday sales growth that lagged behind its competitors, saying that snow kept Britons from visiting out-of- town supermarkets.
Retail stocks lost 1.3 percent this week.
See also
(source:bloomberg.com)
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