Sun, Dec 09, 2012 - Page 15 News List

Optimism about US, China drives EU markets rally

Bloomberg

European stocks rallied for a third week, climbing to an 18-month high, amid increasing optimism that China’s economy will sustain its recovery and US lawmakers will reach a compromise to avoid a fiscal deadlock.

Rio Tinto Group led commodity shares higher, as Nokia Oyj gained 14 percent after winning a deal to sell its flagship smartphone in China. European Aeronautic, Defence & Space Co jumped 15 percent after announcing a new shareholder structure and unveiling a share buyback, while GDF Suez SA slid to a record low after saying earnings will decline next year.

The benchmark STOXX Europe 600 Index advanced 1.2 percent to 279.17 this week, the highest since May last year. The gauge has rallied 19 percent from this year’s low on June 4 as the European Central Bank and the US Federal Reserve expanded bond purchases, and US economic data beat estimates.

Republican defectors joined Democrats in signing a letter calling on US President Barack Obama and US House of Representatives Speaker John Boehner to explore “all options” to end an impasse over taxes on top earners. The US Congress must strike a budget deal before the New Year to prevent US$607 billion of automatic tax increases and spending cuts from coming into effect.

Obama said he is willing to make concessions in the talks if Republicans agree to consider taxes on the rich.

In China, the government under Chinese Vice President Xi Jinping (習近平) will keep macroeconomic policies stable, making adjustments as needed to deal with difficulties, a statement from the Chinese Communist Party’s politburo said.

The world’s second-largest economy will expand domestic demand, actively promote urbanization, strengthen real-estate controls and support small businesses, Xinhua news agency reported on Tuesday, citing the statement issued after a meeting of the ruling party’s top leaders.

In the eurozone, German Chancellor Angela Merkel hinted at the possibility that her country will eventually accept a writeoff of Greek debt. Greece made a 10 billion euro (US$13 billion) offer to buy back bonds.

A gauge of mining companies posted the biggest gain on the STOXX 600. Rio Tinto climbed 5.3 percent after Credit Suisse Group AG added the world’s second-largest mining company to its “Europe Focus” list. Kazakhmys PLCA rose 4.5 percent after saying it will start the development of the Aktogay copper project in Kazakhstan early next year.

Nokia rallied 14 percent after winning a deal with China Mobile Ltd (中國移動) to carry the Finnish mobile phone maker’s flagship smartphone, the Lumia 920T.

EADS jumped 15 percent after the company changed its ownership structure to allow Germany and France to each hold a 12 percent stake. EADS also said it will buy back as much as 15 percent of outstanding shares.

Stagecoach Group PLC, which owns 49 percent of Virgin Trains, advanced 5.9 percent. The company reported first-half pretax profits of £124 million (US$200 million), exceeding the average analyst estimate of £114 million.

Wincor Nixdorf AG, Europe’s biggest maker of automated teller machines, increased 6.8 percent. The company said it expects earnings before interest, taxes and amortization in 2014 to be higher than last year.

GDF Suez declined 12 percent — to the lowest price since it sold shares to the public in July 2005 — after Europe’s largest utility by market value forecast lower earnings next year and weakness in 2014. A gauge of utilities was one of the only two industry groups in the STOXX 600 to decline this week.

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