MW: Europe stocks emboldened by U.S., global gains
Greece hit by fears country is running out of cash
By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) -- European stocks jumped higher on Thursday, taking their cues from Wall Street, which extended gains into a third day on upbeat data. Resource stocks providing a big push for markets, though chemical stocks fell on a downgrade.
The Stoxx Europe 600 index XX:SXXP +0.71% rose 0.2 to 285.04, following a rise of 1.7% on Wednesday, which was its second-consecutive gain.
Among the biggest gainers, shares of Alcatel-Lucent FR:ALU +5.24% rose over 5%. In a note on Thursday, Morgan Stanley reiterated its overweight recommendation on the stock, saying the company’s recent issuance of a €630 million ($820 million) convertible bond is positive for equity holders.
On the downside, shares of Subsea 7 SA NO:SUBC -12.74% tumbled 14% after the Norwegian oil-field services group gave an update on its anticipated losses for an offshore Brazil project. As a result, the company said it no longer expects full-year adjusted earnings before interest, taxes, depreciation and amortization to progress compared with 2012.
The most dramatic action was seen in Greece, where the ASE Composite index GR:GD -1.17% tumbled 3.4% to 808.27, led by a 29% slump for the National Bank of Greece SA GR:ETE -24.37% NBG -17.65% . Markets fell after a report in the Financial Times suggested the country’s bailout program was running out of cash due to a finance gap.
European finance ministers reached an agreement early Thursday on rules for winding down insolvent banks, inking a deal in which banks’ shareholders, creditors and big depositors would take the first hit in the event of a bank crisis. The deal still needs legislative approval from the European Parliament.
A slew of U.S. data underpinned gains for most of Europe’s markets, which were sluggish earlier in the day. Weekly jobless claims fell and personal spending and incomes rose in May, which helped Wall Street extend gains into a third day.
“I think investors are now gearing portfolios for the U.S. economic recovery, picking growth focused assets which include large-cap European stocks exposed heavily to the U.S. recovery -- construction, housing stocks/Industrials and auto makers,” said Ishaq Siddiqi, market strategist at ETX Capital, in emailed comments.
From Europe, German unemployment numbers for June dropped unexpectedly, while euro-zone confidence numbers rose to the highest in a year. Read more about the data
Upbeat day for London, chemicals take a broker hit
The best gains in Europe were found in London, where the FTSE 100 index UK:UKX +1.32% jumped 0.9% to 6,222.46, as resource stocks pushed higher. Shares of Royal Dutch Shell PLC UK:RDSA +1.89% RDS.A +0.80% added to earlier gains, up 1.8%, while miner BHP Billiton PLC UK:BLT +1.76% rose 1%.
“Miners had a horrid day yesterday on drop in gold prices but the stabilization in commodity prices today has prompted a rebound,” said Siddiqi said.
Leading the gains in London, shares of WPP PLC UK:WPP +3.52% jumped over 3% after Bank of America/Merrill Lynch added the media group to its most preferred list, citing an “attractive combination of value and growth.”
Smiths Group PLC UK:SMIN +3.39% rose 2.8% after a lift to buy from neutral at UBS, which said shares are not reflecting upside from a potential sale of its medical division.
Also lower were a handful of chemical companies. J.P. Morgan Cazenove made several cuts to the sector, saying “after three years of tailwinds, the good times may be over,” and potential headwinds lie ahead. BASF SE DE:BAS -1.91% , Lanxess AG DE:LXS -2.96% and Solvay SA BE:SOLB -2.63% were cut to underweight from neutral.
Those shares were off 2.7%, 4%, and 2.8% respectively.
The German DAX 30 index DX:DAX +0.57% shook off a flat start to gain 0.6% to 7,987.02. Leading gains, shares of sports gear maker Adidas AG DE:ADS +2.37% rose 3% after a Barclays upgrade to overweight from equal weight. Barclays said Adidas continues to look attractive relative to peers, brushing off worries over emerging-markets exposure.
The French CAC 40 index FR:PX1 +0.96% rose nearly 1% to 3,761.54, with shares of heavyweight oil group TOT +1.24% FR:FP +1.20% gaining 1.3% on the heels of higher oil prices. Drugmaker Sanofi SA FR:SAN +1.94% SNY +1.26% climbed nearly 2%, also lifting the index.
In Spain, shares of Bankia SA ES:BKIA +2.74% jumped 2.7% after it sold its stake in International Consolidated Airlines Group SA UK:IAG -1.48% for 675 million euros ($879 million). Shares of IAG fell 1.5% in London.
Barbara Kollmeyer is an editor for MarketWatch in Madrid. Follow her on Twitter @MWBarbaraKollmeyer.
