SABMiller, Air-France KLM rise; Ahold’s a rare decliner on results
By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) — European stocks rallied Thursday on expectations that Ireland will soon accept a bailout package from the European Union and the International Monetary Fund, as SABMiller and Air France-KLM surged after strong financial results.
The Stoxx Europe 600 index (ST:STOXX600 270.19, +2.88, +1.08%) rose 1.1% to 270.40, adding to earlier gains, after rising 0.5% in the prior session.
Developments surrounding Ireland’s debt and banking predicament were once again in the spotlight. Central Bank Governor Patrick Honohan said in an interview with Irish state broadcaster RTE that the country is likely to tap loans totalling billions of euros from the EU and the IMF following talks that start Thursday.
European markets powered ahead on bailout hopes. The Irish ISEQ index (XX:IEOP 2,745, +53.56, +1.99%) ranked as one of Europe’s best-performing indexes, up 2.2% to 2,752.09.
The Irish benchmark was led by a 4.2% gain for building-materials group CRH PLC (IE:CRG 14.33, +0.45, +3.24%) . ING upgraded the company to a buy rating from hold, saying CRH offers investors “an opportunity to pick up a stock trading at low multiples on an operationally geared name at the bottom of the market.”
Also higher, shares of Allied Irish Banks PLC (IE:AIB 0.41, +0.02, +4.02%) rose 4.5% amid a volatile day for the stock.
“The banks are in a bad state and so even if the sovereign has no immediate need for assisted funding, it is clear the Irish cannot go it alone to assist the banks any longer,” said Stephen Pope, managing partner at Spotlight Ideas, in emailed comments.
While pinning an exact number on the bailout is not going to “make or break” the equity rally, he said, it will “prove to be a fire break against the recent market turmoil and boost the euro in the short term.”
Pope warned that a resolution of the Irish situation by no means will be the end of the euro-zone crisis. “Mark my words ... patch up Ireland, then in 2011 the market will tear into Iberia,” he said.
Staying within peripheral Europe, Greece’s ASE Composite (XX:COMPO 1,465, -29.49, -1.97%) rose 2.1% to 1,495.39. Earlier, the government submitted a budget plan to parliament that it said will let it adhere to its target of cutting the deficit to 7.4% of gross domestic product in 2011, even amid a sharp upward revision to 2009 and 2010 levels.
U.S. stocks opened sharply higher, benefiting from Ireland-related enthusiasm and as shares of car giant General Motors rose 7% in their market debut.
Data released before the bell on Wall Street showed first-time jobless claims rose 2,000 to 439,000 last week. Still to come are leading indicators for October and the Philadelphia Fed’s November business outlook survey.
Earnings boost and no China panic
Pope also said that inflation-cooling measures announced by China were less dramatic than expected, helping to further boost sentiment in Europe.
In Paris, shares of Air France-KLM (FR:AF 13.98, +0.76, +5.75%) rallied 5.7%, helping to lift airlines across Europe, with British Airways PLC (UK:BAY 272.20, +10.80, +4.13%) gaining 4.1% and Deutsche Lufthansa AG (DE:LHA 16.24, +0.31, +1.95%) rising 1.7%.
Air France-KLM swung to a second-quarter profit as revenue rose 19%. The airline also raised its earnings target for the year.
The French CAC 40 index (FR:PX1 3,844, +51.68, +1.36%) jumped 1.4% to 3,845, led by shares of energy management group Schneider Electric SA (FR:SU 107.80, +4.70, +4.56%) , which gained 4.5% a day after confirming mid-term growth and profitability targets.
Playing on a theme of stronger banks across Europe, shares of Societe Generale SA (FR:GLE 42.70, +1.19, +2.87%) rose more than 3% in Paris, also contributing to the CAC 40’s gains.
The German DAX index (DX:DAX 6,790, +89.93, +1.34%) gained 1.4% to 6,790.75, led by a 4.2% rally in shares of Infineon Technologies AG (DE:IFX 6.58, +0.24, +3.85%) , which continued to benefit from news earlier this week that it will pay its first dividend in a decade.
In London, the FTSE 100 index (UK:UKX 5,760, +67.41, +1.18%) rose 1.3% to 5,763.68, led by a nearly 5% gain for brewer SABMiller (UK:SAB 2,152, +100.00, +4.87%) , which reported a 15% rise in six-month profit. Read more on SABMiller’s results.
In the mining sector, Fresnillo (UK:FRES 1,404, +58.00, +4.31%) advanced 4.2%, as precious metals prices rose.
Another standout in London, shares of Lloyds Banking Group (UK:LLOY 68.22, +1.82, +2.74%) rose 2.8%.
But in the Netherlands, shares of Ahold NV (NL:AH 9.58, -0.33, -3.33%) fell 3.3% after the supermarket operator reported an 8.6% decrease in third-quarter net profit and said the business environment “remains challenging.”
