Sun, Oct 16, 2011 - Page 10 News List

European stocks gain for third week on debt optimism

Bloomberg

European stocks rose for a third week, their longest winning streak since April, on speculation policymakers would increase efforts to contain the debt crisis as company earnings and US retail sales beat estimates.

The STOXX Europe 600 Index advanced 2.8 percent to 238.51 this week. The gauge has still retreated 18 percent since this year’s high on Feb. 17 on concern Greece would default, pushing borrowing costs higher for other indebted eurozone countries. The gauge traded at nine times its companies’ estimated earnings on Sept. 22, the cheapest since March 2009. The STOXX 600 last increased for three consecutive weeks more than six months ago.

G20 finance ministers met in Paris on Friday and yesterday to discuss a rescue plan for Europe’s struggling economies. German Chancellor Angela Merkel and French President Nicolas Sarkozy set an end-of-this-month deadline to devise a plan to recapitalize banks and get Greece on the right track, Sarkozy said last Sunday.

“They are not going to avoid a Greek default at any cost, but they prefer to capitalize banks,” said Giuseppe Distefano, chief investment officer of Alessia Sicav, in Luxembourg. “That helps remove the uncertainty originating in the Greek situation. That has been the main driver of the market rally.”

Standard & Poor’s cut Spain’s credit rating on Thursday for the third downgrade in three years. New data showed the eight largest US money-market funds almost halved their lending to French banks last month.

“With equity markets looking to post their best weekly gains in some time, this improved sentiment is tempered somewhat by the propensity for European leaders to disappoint, when it comes to the crunch,” said Michael Hewson, a market analyst at CMC Markets in London.

EU Commissioner for Economic and Monetary Affairs Olli Rehn said in a speech in Dublin on Wednesday that the eurozone was approaching a consensus on resolving its debt crisis and had a fairly good chance of averting calamity.

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