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Thursday, 6 December 2012
Europe Stocks Advance on Optimism About U.S. Budget Deal
By Namitha Jagadeesh - Dec 6, 2012 2:17 PM GMT+0400
European (SXXP) stocks advanced, extending an 18-month high, amid optimism U.S. lawmakers will agree on a budget. U.S. futures were little changed, while Asian stocks climbed.
European Aeronautic, Defence & Space Co. jumped 7.8 percent after announcing a new shareholder structure and saying it will buy back shares. Daimler AG (DAI) rose 1.2 percent after selling half its remaining holding in EADS. GDF Suez SA slid 13 percent after it said earnings will decline next year.
A euro sign sculpture is seen illuminated at night outside the European Central Bank's (ECB) headquarters in Frankfurt, Germany. Photographer: Hannelore Foerster/Bloomberg
The Stoxx Europe 600 Index added 0.7 percent to 278.80 at 10:07 a.m. in London, its highest level since June 2011. The gauge has surged 19 percent from this year’s low on June 4 as the Federal Reserve boosted economic support and optimism rose that U.S. lawmakers will avoid the so-called fiscal cliff. Standard & Poor’s 500 Index futures rose 0.1 percent today, while the MSCI Asia Pacific Index increased 0.3 percent.
“Markets are moving on the expectation that however difficult things may be, there will be a U.S. budget deal,” said Mike Lenhoff, chief strategist at Brewin Dolphin Securities Ltd. in London. “It’s almost inconceivable at this stage that the Congress will allow the fiscal cliff to happen, especially when we don’t really know the severity of the recession.”
About 80 members of Congress, comprising Republicans and Democrats, signed a letter calling for an exploration of “all options” in a bid to end a deadlock between President Barack Obama and House Speaker John Boehner over taxes for the highest- earning Americans.
Obama and Boehner spoke by telephone yesterday, according to Boehner spokesman Michael Steel. Congress must reach an agreement over the budget by the end of the year to prevent more than $600 billion of automatic tax increases and spending cuts from coming into effect.
European Central Bank President Mario Draghi will unveil updated economic forecasts, including the first outlook for 2014, at a press conference scheduled for 2:30 p.m. in Frankfurt. Economists projected the central bank will keep its benchmark interest rate unchanged at a record low of 0.75 percent, in a decision due 45 minutes before the briefing.
A separate survey of economists projected the Bank of England will also leave its interest rate unchanged in an announcement due at noon in London.
EADS jumped 7.8 percent to 29.36 euros after the company, which failed to win government approval for a merger with BAE Systems Plc earlier this year, changed its ownership structure to allow Germany and France to each hold a 12 percent stake. EADS (EAD) also said it will buy back as much as 15 percent of outstanding shares.
Daimler advanced 1.2 percent to 38.67 euros after selling a 7.5 percent-stake in EADS, valued at 1.66 billion euros ($2.17 billion). The automaker will sell more of its remaining 7.5 percent holding after a lock-up period of 180 days from the end of the sale of the first tranche.
Imagination Technologies Plc (IMG) climbed 3.5 percent to 415 pence after JPMorgan Chase & Co. analysts led by Sandeep Deshpande said in a note that the company’s first-half results next week will meet or beat analyst expectations. The stock has “considerable upside” in the medium term, they wrote.
Barclays Plc (BARC) rose 1.6 percent to 250.5 pence after saying it will increase its stake in South Africa’s Absa Group Ltd. The U.K.’s second-largest lender will receive shares worth 18.3 billion rand ($2.1 billion) in return for merging operations across Africa, Absa said in a statement today.
Barclays’ valuation is very attractive and the shares may rally as “earnings momentum continues to build,” Bank of America’s Merrill Lynch unit said in a note.
GDF Suez (GSZ) tumbled 13 percent to 15 euros, its lowest intra- day price since July 2005, after Europe’s largest utility by market value said late yesterday that recurring net income will be 3.1 billion euros to 3.5 billion euros next year, compared with an expected 3.7 billion euros to 4.2 billion euros in 2012.
Bank of America lowered its recommendation on the shares to neutral, the equivalent of hold, from buy.
Saipem SpA (SPM), Europe’s largest oil contractor by market value, plunged 7.5 percent to 30.24 euros. The company said late yesterday that Chief Executive Officer Pietro Franco Tali and Alessandro Bernini, chief financial officer at its biggest shareholder, Eni SpA, resigned amid an Italian investigation into contracts in Algeria.
Sage Group Plc (SGE) slipped 3.3 percent to 290.4 pence after Natixis cut its recommendation on the stock to neutral from buy.