By Inyoung Hwang - Aug 5, 2013 8:08 PM GMT+0400
European stocks rose for a sixth day, the longest winning streak this year, as services output shrank at a slower pace than initially forecast, outweighing worse-than-estimated earnings from HSBC Holdings Plc.
Lloyds Banking Group Plc climbed 2.7 percent on a report it will pay as much as 70 percent of profit as dividend. Thomas Cook Group Plc, Mediaset SpA and Drax (DRX) Group Plc advanced more than 2.5 percent as analysts upgraded the shares. HSBC, Europe’s largest bank, sank the most in 20 months. PostNL NV, the biggest Dutch postal operator, plunged the most in six months after sales missed estimates.
Traders work on the floor of the Frankfurt Stock Exchange in Frankfurt. Photographer: Ralph Orlowski/Bloomberg
Aug 5 (Bloomberg) -- Nicole Elliott, chief technical strategist at Forextrading.tv, talks about the outlook for the euro and dollar. She spoke Aug. 1 in London. (Source: Bloomberg)
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The Stoxx Europe 600 Index rose 0.2 percent to 304.74 at the close, paring an earlier gain of as much as 0.6 percent. Three stocks increased for every two that fell. The benchmark gauge rose every day last week, adding 1.8 percent in the period, as European Central Bank President Mario Draghi said interest rates in the euro zone will remain low for an extended period. The measure has rallied 9 percent in 2013.
“We’re finally seeing economic data picking up,” Andrea Williams, who helps oversee $76 billion as head of European equities at Royal London Asset Management, said by phone. “The U.S. is still delivering strong data and core Europe is OK. The valuation of the market is still supportive.”
The Stoxx 600 is trading at 13.9 times estimated earnings, the most expensive since December 2009, according to data compiled by Bloomberg.
DAX, FTSE
National benchmark indexes increased in 11 of the 17 western European markets open today. France’s CAC 40 climbed 0.1 percent, while Germany’s DAX slid 0.1 percent and the U.K.’s FTSE 100 dropped 0.4 percent. The Icelandic exchange was closed for a holiday.
The volume of shares changing hands in the index was 28 percent less than the 30-day average, according to data compiled by Bloomberg.
Euro-area services output shrank at a slower pace than initially estimated in July, adding to evidence the economy is gathering strength to pull out of a record-long recession. An index of activity in the services industry based on a survey of purchasing managers rose to 49.8 from 48.3 in June, London-based Markit Economics said. That’s above an initial estimate of 49.6 on July 24. A reading below 50 indicates contraction.
A measure of U.K. services growth climbed more than forecast to the highest level in more than six years.
The Institute for Supply Management’s index of U.S. non-manufacturing businesses rose to 56 in July from the prior month’s 52.2, a report from the Tempe, Arizona-based group showed today. The median forecast in a Bloomberg survey of economists called for a gain to 53.1.
Lloyds Dividend
Lloyds jumped 2.7 percent to 75.69 pence, the highest price since October 2010. Chief Executive Officer Antonio Horta-Osorio said during investor presentations that he plans to pay 60 percent to 70 percent of earnings as dividends by 2015, according to a report by the Financial Times, which cited unidentified people involved in the meetings.
Thomas Cook surged 5.5 percent to 169.9 pence, the highest since February 2011. The 172-year-old U.K. tour operator was lifted to a buy from neutral by Citigroup Inc. analyst Josh Lipman, who cited expectations for cost savings that will help drive earnings. He boosted his price estimate by 33 percent to 195 pence. Bank of America Corp. increased its target to 145 pence from 115 pence, while maintaining an underperform rating.
Mediaset rose 4 percent to 3.43 euros. Deutsche Bank AG analyst Laurie Davison upgraded the broadcaster controlled by Silvio Berlusconi to buy from hold, saying pullbacks in the share price offer attractive entry points.
Drax Gains
Drax added 2.9 percent to 672.5 pence, the highest since October 2008. Goldman Sachs Group Inc. analyst Andrew Mead lifted his rating on the U.K. utility to conviction buy from neutral, citing the company’s transformation from a coal-fired power plant to a mostly biomass-fueled facility.
“New fixed-price subsidies for renewables (including biomass) recently published by the government indicate upside potential to profits,” Mead wrote.
Alcatel-Lucent increased 3.6 percent to 1.92 euros. Citigroup analyst Kevin Dennean raised his price target on the telecommunications equipment and services provider to 2 euros from 1.45 euros, citing “strong” second-quarter results.
HSBC slid 4.4 percent to 721.7 pence, the largest drop since November 2011. First-half net income rose 10 percent to $10.28 billion after U.S. loan impairments fell, the London-based lender said. That was below the $10.57 billion estimate of five analysts surveyed by Bloomberg.
Emerging Markets
The bank said the mainland Chinese market slowed unexpectedly in the first quarter of 2013, while Latin American growth eased in the first half on weak consumer consumption. HSBC also said it faces a potentially “highly damaging impact” from planned European Union restrictions on bonuses.
PostNL (PNL) sank 11 percent to 2.48 euros, the biggest decline since Jan. 14. The Amsterdam-based company said sales in the second-quarter were 1.03 billion euros ($1.37 billion), falling short of the 1.04 billion euros predicted by analysts on average. PostNL forecast addressed mail volume in 2013 will drop as much as 11 percent, greater than its previous forecast of no more than 10 percent.
To contact the reporter on this story: Inyoung Hwang in London at ihwang7@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
