CAC-40 rallies after Fitch comments; Luxury-goods stocks jump
By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) — European stock markets rose sharply on Tuesday, with investors inspired by results from Alcoa Inc., while French stocks got a lift on comments from Fitch Ratings that it doesn’t plan to downgrade the country this year.
The Stoxx Europe 600 index XX:SXXP +1.79% rose 1.8% to 250.97 in afternoon trade.
U.S. stock futures traded sharply higher after Alcoa’s AA +3.34% quarterly sales exceeded expectations.
Also boosting sentiment, China’s December trade surplus was wider than expected. The data indicated a soft rather than a hard landing for the economy, according to some analysts.
John Ventre, fund manager at Skandia Investment Group, said there’s a growing market belief that some of the risks surrounding China’s growth picture are beginning to fade. “That got people more on the bullish foot in Europe,” he said.
The China data and Alcoa’s results inspired commodity prices, boosting related shares. Oil group BP PLC BP +1.29% UK:BP +1.48% rose 1.5%. Miners Rio Tinto PLC RIO +3.66% UK:RIO +3.99% and BHP Billiton PLC UK:BLT +3.95% BHP +3.05% gained around 3.5% each.
Atif Latif, director of trading at Guardian Stockbrokers, said the pan-European Stoxx 600 is also seeing catch-up gains Tuesday on the view it has underperformed versus some individual-country indexes.
“We still remain cautious of the short-term outlook and are adding to short positions on spikes to companies that we feel have more downside risk given the macroeconomic outlook,” Latif said in emailed comments.
Greece’s ASE Composite index GR:GD -1.34% fell 1% to 629.93 amid worries the country may need a larger second bailout. German Chancellor Angela Merkel and International Monetary Fund Managing Director Christine Lagarde will meet Tuesday evening in Berlin, and Greece will be among the topics they’ll discuss.
Banks, luxury boost
Italian stocks were outperforming the rest of Europe, with the FTSE MIB index XX:FTSEMIB +3.41% up 3.3% to 14,877.58, led by Italian banks, which have sold off sharply in recent days over a capital raising plan by UniCredit SpA IT:UCG +7.09% . That stock, which fell 30%-plus last week, was up 7.9%.
At a conference in London, Fitch’s Head of Global Sovereign Ratings David Riley, said there was a significant chance of a downgrade for Italy if Europe cannot provide a credible financial firewall. Yields on 10-year Italian bonds IT:10YR_ITA -0.52% continued to climb, recently up 13 basis points to 7.13%. Read more on Fitch's comments about Italy
The French CAC 40 index FR:PX1 +2.86% jumped 2.7% to 3,213.71. A Fitch representative reiterated Tuesday the rating’s firm December statement in which it said the country would keep its triple-A credit rating in 2012 unless there is a major economic shock.
Among French banks, BNP Paribas SA FR:BNP +5.90% rose 6% and Societe Generale SA FR:GLE +3.77% gained 3.8%.
A more upbeat view on China’s economy lent a hand to luxury-goods companies. LVMH Moet Hennessy Louis Vuitton SA FR:MC +3.18% rallied 3.6%. Also helping, Swatch Group AG CH:UHR +3.57% rose 3% after posting strong 2011 sales. The watch maker exceeded the 7 billion Swiss franc level ($7.4 billion) on group sales for the first time ever.
Among other luxury-goods stocks in Europe, Tod’s SpA IT:TOD +5.00% rose 5%, and Luxottica Group SpA IT:LUX +2.95% and Christian Dior SA FR:CDI +2.99% each added 3%.
German stocks virtually matched gains in France, with the DAX 30 index DX:DAX +2.69% up 2.8% to 6,183.05, led by a 7.8% rise for Commerzbank AG DE:CBK +6.64% and a 5.5% gain for Allianz SE DE:ALV +5.01%
In London, the FTSE 100 index UK:UKX +1.56% rose 1.6% to 5,699.19. Heavyweight banks Barclays PLC UK:BARC +5.67% BCS +4.85% and HSBC Holdings PLC HBC +1.10% UK:HSBA +1.90% jumped 5.9% and 2%, respectively.
Retailer Marks & Spencer Group PLC UK:MKS +3.08% rose 3% after well-received 13-week sales data.
On the downside in Europe, shares of Philips Electronics NV PHG -3.62% NL:PHIA -3.48% fell 2.6% after warning on its fourth-quarter results. The company said group sales for the period will show mid-single-digit growth from a year ago.
Shares of Software AG DE:SOW -21.10% tumbled 22% after the firm said weak U.S. sales will result in a drop in fourth-quarter revenue.
