SF; European Stocks Gain as China Says Euro Reports Are Groundless
May 27 (Bloomberg) -- European stocks rose for a second day 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, advanced 7 percent after reporting earnings that topped analyst estimates. Ageas, the insurer formerly known as Fortis, rallied 9.3 percent after cutting its holdings of southern European government bonds. BHP Billiton Ltd. and Rio Tinto Group led mining companies higher as base metals climbed.
The Stoxx Europe 600 Index gained 1.9 percent to 242.33 at 12:36 p.m. in London. The measure has fallen 6.8 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 times the reported earnings of its companies, near the cheapest valuation since 2008, according to Bloomberg data.
"Today's statement is comforting," said Francisco Salvador, a strategist at Iberian Equities in Madrid. "This is one of the world's leading holders of foreign reserves and ultimately China doesn't want to see a further weakening of the euro."
Asian, U.S. Shares
The MSCI Asia Pacific Index rallied 1.9 percent today and futures contracts on the U.S. Standard & Poor's 500 Index expiring next month surged 2.3 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. 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 the Financial Times reported that China's foreign exchange administration met with bankers because of concerns about exposure to Europe.
China does not "have to sell euro assets, they could just accumulate them less rapidly so it's probably still not entirely clear if they're selling euro assets or not," Keith Wade, the London-based chief economist at Schroders Plc, said in a Bloomberg Television interview. Europe's "monetary policy has got to stay very loose. More monetary support is needed to make sure the fiscal austerity measures don't cause a recession."
Biggs, Sprott
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.
"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."
Jobless Claims
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.
"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 7 percent to 230.3 pence. The company said full-year pretext profit fell to $541 million, topping the average analyst estimate of $538 million.
Ageas climbed 9.3 percent to 2.04 euros, leading a gauge of insurance stocks to the biggest gain among 19 industry groups in the Stoxx 600. The company sold 4.8 billion euros ($5.9 billion) of southern European government bonds, reducing the concentration of the region in its investment holdings.
Prudential Gains
Prudential Plc jumped 5.5 percent to 540.5 pence, the most since August, after Neptune Investment Management Ltd. said investors owning as much as 20 percent of the U.K. insurer plan to vote against the $35.5 billion takeover of American International Group Inc.'s main Asian unit.
Prudential shares had slumped 15 percent since announcing its agreement to buy AIA Group Ltd. on March 1.
Aviva Plc, the U.K.'s second-biggest insurer, surged 5.9 percent to 317.6 pence. Legal & General Group Plc, the fourth- largest, soared 5.8 percent to 78 pence.
BHP Billiton, the world's biggest mining company, advanced 3.3 percent to 1,919 pence. Rio Tinto, the third-largest, increased 3.3 percent to 3,166 pence. Copper rose as much as 1.9 percent on the London Metal Exchange.
QinetiQ Climbs
QinetiQ Group Plc soared 13 percent to 131.5 pence, the biggest gain since October, after Chief Executive Officer Leo Quinn announced a plan to restore the defense-services company to growth following a full-year loss.
Britain's former defense-research laboratory is still suffering from a "civil-service mentality" four years after it became a listed company and will seek to cut about 10 percent of its costs in the U.K., Quinn said.
Cie. Financiere Richemont SA declined 1.6 percent to 38 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.
--With assistance from Linzie Janis and Alexis Xydias in London. Editors: Andrew Rummer, David Merritt.
