European stocks climbed yesterday, paced by energy companies including Total SA, after Citigroup Inc raised its recommendation for the industry. Anglo American Plc and Nokia Oyj also rose.
The Dow Jones Stoxx 50 Index advanced for a second day, adding 24.08, or 1 percent, to 2429.50. The Stoxx 600 gained 0.8 percent to 208.00, with almost a third of the advance coming from the energy industry.
Total, the region's third-largest oil company, Royal Dutch/Shell Group and other energy companies led the week's gains as the price of Brent crude rose amid concern Iraqi oil exports won't return to prewar levels any time soon. Crude oil increased to US$32.77 a barrel on the New York Mercantile Exchange yesterday, the highest since March 18.
"Oil companies are a good investment because with the high oil price you can expect solid profits," said Thomas Deser, who manages US$1.8 billion in assets at Union Investment in Frankfurt and owns shares of Total and ENI SpA. "Analysts will have to raise their earnings estimates for the industry as many based their calculations on an oil price of US$25 to US$26 for the year."
Yesterday's advance helped the indexes rebound from a four-day decline, trimming the Stoxx 50's drop to 0.1 percent for the week and the Stoxx 600's to 0.4 percent.
Chemical makers fell this week, led by BASF AG, the industry leader, which said quarterly profit plunged 61 percent and predicted a further drop. The stock lost 5.6 percent this week.
Yesterday, benchmark indexes rose in 13 of the 17 Western European markets. Germany's DAX rose 0.01 percent and finished the week down 3.1 percent. The UK's FTSE 100 added 1.3 percent, for an advance of 1.2 percent since last Friday. France's CAC rose 1.1 percent. The index lost 0.1 percent this week.
Citigroup upgraded European energy stocks to "overweight" from "underweight," saying the industry has lagged rivals.
Energy companies are the second-worst performing group of the Stoxx 600's 18 industries since March 12, when the index fell to its lowest in six years. The energy index has added 17 percent, while the broader measure has climbed 28 percent.
Insurance companies, the biggest gainers, have surged 54 percent.
Citigroup added Total and Royal Dutch/Shell Group to its list of most-favored stocks. It deleted financial companies such as ING Groep NV, the largest Dutch financial-services company, and Legal & General Group Plc, the UK's fourth-largest insurer.
On average, energy companies' stocks are trading at 13 times historical earnings per share, while the average for the Stoxx 50 is 33.76 times. Union Investment's Deser said he expects energy stocks to rise as much as 10 percent by year-end.
Yesterday, Royal Dutch Petroleum Co, the 60 percent-owner of Royal Dutch/Shell Group, the region's largest oil company, advanced 1.5 percent to 39.50 euros for a weekly gain of 3.7 percent. Shell Transport & Trading Co, which owns the rest, rose 1.7 percent to < Total climbed 3.2 percent to 135.90 euros, for a five-day gain of 5.6 percent, and Eni added 3 percent to 13.45 euros. It increased 3.6 percent this week. Alstom SA, the French maker of power stations, trains and ships, was the worst-performing stock on the Stoxx 600 this week, with a decline of 22 percent to 2.40 euros. The shares were suspended Monday and Tuesday. On Wednesday, the company presented a refinancing plan to help avoid bankruptcy.
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