European stocks climbed this week, as the Italian Senate approved austerity measures, easing concern the country would need a bailout, and US consumer confidence rose this month more than economists had predicted.
The benchmark STOXX Europe 600 Index gained 0.5 percent to 240.98 this week on optimism a new government led by former EU commissioner for competition Mario Monti would take charge in Italy. The STOXX 600 will rally 14 percent to 275 through the end of next year as earnings growth supports valuations and “extreme pessimism” abates, according to Barclays PLC.
“Concerns about Europe’s debt crisis seem to be easing as Italy and Greece take measures to address ongoing issues and draw a line under the situation,” said Manoj Ladwa, a senior trader at ETX Capital in London.
In Italy, the Senate voted 156 to 12 to pass the package of measures promised to the EU in a bid to boost growth and cut Italy’s debt of 1.9 trillion euros (US$2.6 trillion), the world’s fourth biggest. Opposition lawmakers did not take part in the vote, allowing the bill to pass.
The Senate brought forward the ballot after Italian Prime Minister Silvio Berlusconi lost his parliamentary majority this week, leading bond yields to surge to euro-era records. Italy’s debt exceeds that of Greece, Spain, Portugal and Ireland combined. Unlike those nations, it has systemic importance as the world’s third-largest bond market and the eighth-biggest economy.
In the US, the Thomson Reuters/University of Michigan preliminary index of consumer sentiment for this month rose to 64.2 from a final reading of 60.9 last month.
“Consumer confidence is improving, indicating a dislocation between consumers’ retail confidence and consumers’ financial and political system confidence,” said Daniel Weston, a portfolio adviser at Schroeder Equities GmbH in Munich.
National benchmark indices climbed in 10 of the 18 Western European markets. France’s CAC 40 gained 2.8 percent, the UK’s FTSE 100 Index rose 0.3 percent and Germany’s DAX jumped 1.5 percent.
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