Sun, Oct 13, 2013 - Page 15 News List

EU stocks rise this week as worries of US default ebb

Bloomberg

European stocks snapped two weeks of losses this week, as concern over a potential default by the US government faded and the nomination of US Federal Reserve Vice Chairwoman Janet Yellen to head the US central bank signaled the continuation of its stimulus.

Celesio AG surged 19 percent as McKesson Corp was said to be in talks to buy a majority stake in the drug wholesaler, while Persimmon PLC and Taylor Wimpey PLC led house builders higher as British property prices surged to an 11-year high and Goldman Sachs Groups Inc predicted further growth. Meanwhile, TGS Nopec Geophysical Co slumped 16 percent after reducing its sales forecast because of delays in getting permits for new surveys.

The STOXX Europe 600 Index added 0.6 percent to 311.61 this week after slipping 1.4 percent in the previous two weeks. The gauge has rallied 11 percent so far this year as the eurozone emerged from a recession and central banks maintained stimulus measures to support the global economy.

National benchmark indices advanced in 13 of the 18 western European markets this week. Germany’s DAX increased 1 percent to a record-high, while the UK’s FTSE 100 added 0.3 percent and France’s CAC 40 rose 1.2 percent.

The STOXX 600 lost 1.5 percent in the first three days of the week as a partial shutdown of the US government continued, but reversed losses as signs of a temporary resolution to the fiscal impasse emerged later in the week when Republicans in the US House of Representative proposed a short-term increase to the debt ceiling that would buy the government time until Nov. 22 to conclude a longer agreement.

Obama had earlier warned that the world’s biggest economy would slide into a recession if lawmakers failed to raise the ceiling.

Without congressional action, the US will exhaust its borrowing authority by Thursday next week, according to the US Department of the Treasury.

“Many investors believe that a solution to the US debt problem will be found, even if just a temporary one,” said Yves Maillot, who manages 18.5 billion euros (US$25 billion) as head of European equities at Natixis Asset Management in Paris.

Investors also turned their attention to corporate earnings as the shutdown delayed the release of some US economic data. Alcoa Inc, JPMorgan Chase & Co and Wells Fargo & Co all posted results that exceeded analysts’ estimates this week.

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