As US dollar gains, so do some European exporters

"Europe needs the US to rebound because it's the locomotive."

Benoit Flamant, chief executive at IT Asset Management

European stocks gained this week as earnings of companies including Imperial Chemical Industries Plc and Schneider Electric SA topped analysts' forecasts.

Royal Philips Electronics NV and Munich Re led advances by companies with earnings dependent on the dollar as the US currency headed toward its biggest weekly increase against the euro since March.

The Dow Jones Stoxx 600 Index dropped 1.1 percent yesterday as of 9:09pm in London, trimming its five-day increase to 1.4 percent. Each of the 18 industry groups rose this week except utilities, retail and health care. The Dow Jones Stoxx 50 Index lost 1.7 percent, for a weekly advance of 1 percent.

"There is a recovery out there and the earnings figures now demonstrate that," said Mike Lenhoff, who helps manage the equivalent of US$21.7 billion as chief strategist at Brewin Dolphin Holdings Plc in London.

Imperial Chemical, the UK's largest specialty chemical maker, yesterday said profit before tax and goodwill amortization fell 22 percent to ?98 million (US$158 million), beating the 32 percent drop forecast on average by analysts surveyed by Bloomberg News. They climbed 28 percent this week.

Schneider Electric, the world's largest maker of circuit breakers, has added 4.6 percent since last Friday's close. The company said first-half profit rose 8 percent to 190 million euros (US$214 million), more than the 152 million-euro median forecast of eight analysts in a Bloomberg News survey.

The dollar advanced 2.1 percent against the euro this week.

That helps companies with US sales that report in euros because they get more of the European currency as the dollar climbs.

The Commerce Department said yesterday the US economy expanded at a 2.4 percent annual pace last quarter, faster than the 1.5 percent rate economists predicted, according to a Bloomberg survey.

Philips, a maker of consumer electronics that earns about 30 percent of its sales in the US, added 3.2 percent in the week.

Munich Re, the world's largest reinsurance company by premiums, jumped 8.9 percent since last Friday's close. In June, Munich Re forecast its US unit American Re would post a profit of US$550 million this year.

Delhaize Group SA, a Brussels-based retailer that gets more than 70 percent of its sales from the US, jumped 23 percent today after raising this year's profit and sales forecasts, citing gains from cost cuts.

Earnings before amortization and one-time costs and gains will increase as much as 20 percent, excluding currency changes, the company said. Earlier it forecast profit would be little changed. The shares increased 21 percent this week.

Today, the dollar fell after the US government said the US economy unexpectedly lost 44,000 jobs last month and an industry report showed manufacturing expanded less than economists forecast. The US had been expected to add 10,000 jobs according to the median forecast of economists in a Bloomberg Survey.

European stocks extended declines after the reports indicated growth in the region's largest export market may be weaker than anticipated.

"Europe needs the US to rebound because it's the locomotive" for global economic growth, said Benoit Flamant, chief executive at IT Asset Management in Paris, which oversees US$225 million of technology-related stocks.

ABB Ltd, Europe's largest electrical-engineering company, led gains in the Stoxx 600, surging 55 percent over five days.

The company said Tuesday it would meet its profit target for this year, prompting brokerages including Merrill Lynch & Co and Deutsche Bank AG to raise their recommendation on the stock the following day.

Today, a US judge approved the company's US$1.3 billion settlement of 130,000 asbestos-related lawsuits, paving the way for the sale of the company's oil-services unit, which was facing claims.

BT Group Plc, the biggest UK phone company, was the Stoxx 50's largest decliner this week after it said sales in the three months through June dropped from the previous quarter. The figure overshadowed a 27 percent jump in net income, the company's fifth straight quarterly profit. The shares fell 5.9 percent.

Hagemeyer NV, the largest supplier of industrial safety products in the US, slid 19 percent in the week. On Thursday, the company reported a first-half loss, compared with a profit a year earlier, after sales fell and it set aside money to pay for job cuts.