BLBG: European Stocks Advance as Mining Stocks Rally
European stocks rallied for a fourth day, U.S. futures gained and the pound and the euro strengthened as economic reports showed improvement in Britain and Germany, earnings beat analysts’ estimates while concern eased over bank stress tests.
The Stoxx Europe 600 Index gained 0.2 percent at 10:13 a.m. in London, while futures on the Standard & Poor’s 500 Index rose 0.3 percent. The euro appreciated 0.5 percent against the dollar, and the pound gained against its 16 most-traded peers. Copper rose to a two-month high.
Microsoft Corp.’s record fourth-quarter revenue and Adidas AG’s surge in profit fueled investor optimism in the outlook for earnings. About 84 percent of companies in the S&P 500 that have reported since July 12 have beaten analysts’ earnings estimates, according to data compiled by Bloomberg. The U.K. economy grew almost twice as much as economists forecast in the second quarter, and business confidence in Germany unexpectedly surged to a three-year high in July.
“Our best guess is that these results kick the can further down the road without fully putting the matter to bed,” Jim Reid, a strategist at Deutsche Bank AG in London, wrote in a research report. “It doesn’t seem like there’s anywhere near enough private capital to fund the European banking system’s debt needs.”
The MSCI World Index of stocks in 24 developed nations gained 0.6 percent. Adidas, the world’s second-largest sporting- goods maker, jumped 3.4 percent. Akzo Nobel NV, the world’s biggest maker of paints, rallied 4.1 percent in Amsterdam as profit topped forecasts. Vodafone Group Plc, the largest mobile- phone company, gained 1.9 percent in London after service revenue unexpectedly returned to growth.
Ford, McDonald’s
The gain in U.S. futures indicated the S&P 500 may extend yesterday’s 2.3 percent rally. Thirteen companies in the U.S. benchmark gauge are scheduled to report earnings today, including Ford Motor Co., Verizon Communications Inc. and McDonald’s Corp. before the start of trading in New York. The MSCI Asia Pacific Index jumped 1.8 percent.
The euro strengthened to $1.2956. German business confidence unexpectedly surged to a three-year high in July. The Ifo institute said its business climate index, based on a survey of 7,000 executives, jumped to 106.2, the highest since July 2007, from 101.8 in June. Economists had expected a decline to 101.5, according to the median of 41 forecasts in a Bloomberg News survey. The dollar weakened against all but two of its most-traded counterparts.
U.K. Growth
Sterling advanced 0.8 percent to $1.5387 and strengthened 0.4 percent to 84.17 pence per euro. U.K. GDP rose 1.1 percent in the three months through June after increasing 0.3 percent in the previous quarter, the Office for National Statistics said in London today. Economists forecast a 0.6 percent gain, according to the median of 32 predictions in a Bloomberg news survey.
“The market is in a bright mood on the back of strong economic data,” Bill Blain, joint head of fixed income at Matrix Capital in London, wrote in a research report. “The stress tests can’t acknowledge what the European Union can’t admit may happen -- the risk of a European sovereign or euro meltdown.”
The cost of insuring bank bonds from default fell to the lowest since May 13, with the Markit iTraxx Financial Index of credit-default swaps dropping 4 basis points to 130, according to JPMorgan Chase & Co. Regulators in Europe are scrutinizing banks to assess if they have enough capital to withstand a recession and sovereign debt crisis. Lenders that fail the trials will be made to raise additional capital. The results will be published starting at 6 p.m. Brussels time today.
Hungary Rating
Hungary’s bonds and currency declined after Moody’s Investors Service put Hungary’s debt rating under review for possible downgrade following the government’s failure to persuade the International Monetary Fund and European Union that its deficit-reduction plans are sustainable.
The forint weakened for the first time in four days, falling 0.3 percent against the euro. The extra yield investors demand to own the Hungary’s foreign-currency debt over U.S. Treasuries rose seven basis points to 3.51 percentage points, according to JPMorgan Chase & Co.’s EMBI Global Index.
The MSCI Emerging Markets Index gained for a fourth day, climbing 0.9 percent and heading for the highest closing level since May 4. Technology companies including Chinese computer maker Lenovo Group Ltd. and Taiwan Semiconductor Manufacturing Co. led the advance.
Copper for delivery in three months climbed 0.8 percent on the London Metal Exchange. Industrial metals prices have climbed every day this week, the longest advance since June 15. Gold for immediate delivery increased 0.6 percent to $1,201.88 an ounce, the second consecutive gain.
To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net
