BLBG: European Stocks Gain as China Says Euro Reports Are Groundless
By Adam Haigh
May 27 (Bloomberg) -- European stocks rose after China’s foreign exchange regulator said reports that it was reviewing its euro holdings are “groundless.” Asian shares and U.S. index futures surged.
Man Group Plc, the biggest publicly traded hedge fund firm, soared 3.9 percent after reporting earnings that topped analyst estimates. Daily Mail & General Trust Plc climbed 2.3 percent after the owner of Britain’s Daily Mail newspaper said profit rose 51 percent. Ageas, the insurer formerly known as Fortis, rallied 8.1 percent after cutting its holdings of southern European government bonds.
The Stoxx Europe 600 Index gained 1 percent to 240.07 at 8:29 a.m. in London. The measure has fallen 7.6 percent so far this month, on course for the biggest drop since February 2009, amid concern that European nations will have difficulty reducing their budget deficits without harming the economic recovery. The decline has left the gauge trading at about 14.4 times the reported earnings of its companies, near the cheapest valuation since 2008, according to Bloomberg data.
The MSCI Asia Pacific Index rallied 1.9 percent today and futures contracts on the Standard & Poor’s 500 Index expiring next month surged 2 percent.
China is a responsible long-term investor and Europe has been and will be a major investment market, the State Administration of Foreign Exchange said in a statement on its website today. The Financial Times reported yesterday that the administration met with bankers because of concerns about exposure to Europe, without saying where it got the information.
Maintain Investments
In addition, China’s official Xinhua News Agency said the nation’s $300 billion sovereign wealth fund will maintain its investments in the euro region, citing China Investment Corp. President Gao Xiqing.
U.S. stocks fell yesterday, with the Dow Jones Industrial Average closing below 10,000 for the first time since February, as a report that China may review investments in European government bonds spurred concern the credit crisis will worsen.
The S&P 500 has slumped 10 percent in May, poised for its worst month since February 2009. Barton Biggs, who runs New York-based hedge fund Traxis Partners LP and recommended buying U.S. stocks last year when benchmark indexes sank to the lowest levels since the 1990s, said U.S. equity markets are oversold and may rally strongly over the next few days. Eric Sprott, the manager of the best-performing Canadian mutual fund with at least $1 billion in assets in the past 10 years, said this month’s declines are the beginning of a collapse that will drive the measure below its lowest level of 2009 during the next year.
‘Ongoing Bull Market’
“Despite the fact that a lot of people think that we are entering into a bear market, we don’t believe so,” said Mark Mobius, who oversees about $34 billion in emerging markets as Templeton Asset Management Ltd.’s Singapore-based executive chairman. “This is a correction in an ongoing bull market.”
A U.S. Labor Department report today may show the number of Americans filing for jobless claims fell last week to 455,000 from 471,000, according to the average economist estimate in a Bloomberg survey.
Former Bundesbank President Helmut Schlesinger said the euro’s slide hasn’t left it at an unnaturally low level and the breakup of Europe’s 16-nation currency union is out of the question.
‘Isn’t in Danger’
“The euro isn’t in danger,” Schlesinger, who ran the German central bank from 1991 to 1993, said in a May 25 phone interview from his home in suburban Frankfurt. While the pace of the currency’s decline “did give cause for concern,” its level “is by no means catastrophically low,” he said.
Man Group rallied 3.9 percent to 223.6 pence. The company said full-year pretext profit fell to $541 million, topping the average analyst estimate of $538 million.
Daily Mail advanced 2.3 percent to 483 pence. Group profit rose to 81 million pounds ($117 million) in the first half of the year as profitability in its U.K. business more than doubled.
Ageas climbed 8.1 percent to 2.02 euros. The insurer sold 4.8 billion euros ($5.9 billion) of southern European government bonds, reducing the concentration of the region in its investment holdings.
Pennon Group Plc, a water supplier in southwest England, rose 1.3 percent to 509.5 pence after Citigroup Inc. upgraded the shares to “buy” from “hold.”
Cie. Financiere Richemont SA declined 2.8 percent to 37.54 Swiss francs. The world’s largest jewelry maker said profit from continuing operations rose to 258 million euros in the six months ended March 31, based on calculations from full-year results released today by the Geneva-based company. That missed the average 354 million-euro estimate of nine analysts surveyed by Bloomberg.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
