Banks turn positive; Merck KGaA slumps after drug news
By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) — European stocks posted strong gains on Friday, with the benchmark indexes in Germany and France rallying nearly 2%, after U.S. durable-goods data eased worries about a slowdown in the global economy.
The Stoxx Europe 600 index (ST:SXXP 264.01, +2.94, +1.13%) rose 1.1% to 264 points in late afternoon trading, after spending the day in negative territory. The index has gained 5% so far in September.
In Paris, the CAC 40 index (FR:PX1 3,778, +67.04, +1.81%) rallied 1.9% to 3,780.72.
Shares of Alcatel-Lucent SA (FR:ALU 2.50, +0.18, +7.68%) surged 8.5%. The stock was reportedly upgraded to buy at Oddo Securities.
The German DAX 30 index (DX:DAX 6,297, +111.97, +1.81%) advanced 1.8% to 6,295.53.
Shares of Adidas AG (DE:ADS 46.00, +2.44, +5.60%) rose 5.3% after U.S. sportswear firm Nike Inc. (NKE 81.14, +3.47, +4.47%) reported strong orders for the first quarter, with big gains in key emerging markets.
Durable-goods data triggered a rally on Wall Street and Europe followed suit. Orders for durable goods dropped 1.3% in August, the Commerce Department reported. But excluding transportation, new orders rose 2%.
Also, investors focused on the fact that orders for nondefense capital goods excluding aircraft increased 4.1% in August.
“The report supports our view that capital spending continues to support the economy, which argues strongly against a double-dip [recession],” said Christoph Balz, an analyst at Commerzbank AG, in a note to clients.
Meanwhile, U.S. sales of new homes were unchanged in August at a seasonally adjusted annual rate of 288,000, data also showed.
Earlier, the Ifo Institute’s business-sentiment survey for Germany rose to 106.8 in September from 106.7 in August, defying expectations for a decline. The August number was a three-year high.
Lothar Mentel, chief investment officer at Octopus Investments in London, said he expects European markets to stick to the “see-saw” activity that went on for much of the summer in the near term.
The big market focus is Federal Reserve Chairman Ben Bernanke’s next step on quantitative easing as a means of stimulating the U.S. economy. Bernanke will speak on the fallout of the financial crisis after the close of Wall Street on Friday.
“Markets will probably be trending up slowly, but depending on how the QE 2 (quantitative easing) story pans out, we’re in this slightly absurd situation where markets will rally on mildly negative macroeconomic data in the U.S.,” he said. “If it becomes particularly positive or more than negative that increases the risks markets will fall as it makes QE2 less likely.”
“The best outcome for markets in the next couple of weeks is a continued stream of mixed to slightly bad macroeconomic data coming out of the U.S.,” he said.
