European stocks climbed for a fifth week, the longest stretch of gains in 18 months, after the region’s leaders struck a deal to enact measures to contain the sovereign debt crisis following months of negotiations.
An index of banks surged the most since July last year, as Credit Agricole SA and Deutsche Bank AG jumped more than 19 percent. Kazakhmys PLC, Kazakhstan’s biggest copper producer, and SSAB AB, the Stockholm-based steelmaker, led basic-resources companies to the largest gain in more than two years. BP PLC, Merck KGaA and Renault SA rallied at least 6 percent after results topped analyst estimates.
The STOXX Europe 600 Index climbed 4.2 percent to 249 this past week. The gauge has surged 10 percent this month, heading for its biggest monthly advance since April 2009, amid speculation the economy will evade another recession and Europe will avoid the worst effects of the region’s debt crisis. The measure has risen 16 percent from this year’s low on Sept. 22.
Photo: Reuters
HEADLINE POWER
“We got the right headlines on solving the euro crisis,” said Lars Rohde, chief executive officer of the Hilleroed, Denmark-based ATP pension fund. “Stocks are showing strong gains, but the devil still lies in the detail.”
European leaders agreed to boost the firepower of the region’s rescue fund to 1 trillion euros (US$1.4 trillion) and persuaded bondholders to take 50 percent losses on Greek debt, responding to pressure to come up with a credible plan before next week’s G20 meeting in France.
The measures include recapitalization of European banks, a potentially bigger role for the IMF and a commitment from Italy to reduce its debt. The Wednesday summit was the 14th in the 21 months since Europe pledged solidarity with Greece to help the nation avoid default.
STILL IN THE WOODS
The announcements “should satisfy market expectations in the shorter term, while falling short of resolving the underlying challenges facing the euro-zone economy,” wrote Peter Oppenheimer, chief global equity strategist at Goldman Sachs Group Inc in London, in a report. “Uncertainties need to be resolved quickly and credibly in order to sustain a positive market reaction.”
Goldman Sachs raised its three-month target for the STOXX 600 to 255 from 220.
National benchmark indices climbed in all 18 Western European markets this week, except Portugal. The UK’s FTSE 100 jumped 3.9 percent, France’s CAC 40 Index gained 5.6 percent and Germany’s DAX increased 6.3 percent. Portugal’s PSI-20 slipped 0.8 percent as Banco BPI SA tumbled 9.8 percent.
Banco BPI dropped after saying it would study different options to meet new capital requirements, including the possibility of using a 12 billion euro recapitalization facility for Portuguese lenders that’s part of the country’s financial assistance program.
The STOXX 600 Banks Index advanced 9.1 percent this week, the most since July last year. Credit Agricole rallied 27 percent and Deutsche Bank, Germany’s largest lender, jumped 19 percent. BNP Paribas SA, France’s biggest bank, surged 14 percent and Barclays PLC rose 11 percent.
Stocks also advanced as more than 100 companies in the STOXX 600 reported earnings this week. Half of the 140 companies in the gauge that have released results since Oct. 11 beat analysts’ per-share profit estimates, according to data compiled by Bloomberg.
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