Sun, Jul 13, 2014 - Page 15 News List

Europe stocks little changed as bank concern settles

Bloomberg

European stocks were little changed, halting five days of losses, amid increased takeover activity and as investors bet the financial troubles of Banco Espirito Santo SA (BES) would not spiral into an euro-area banking crisis.

Imperial Tobacco Group PLC rose to its highest price since at least 1996 after confirming talks with Reynolds American Inc and Lorillard Inc to buy some assets and brands. Symrise AG climbed as a report said Japan’s Ajinomoto Co may be interested in buying the German maker of flavors and fragrances. Indesit Co added 2.9 percent after Whirlpool Corp agreed to pay US$1 billion for a controlling stake in the Italian appliance maker.

The STOXX Europe 600 Index added 0.2 percent to 336.91 at the close in London after rising as much as 0.5 percent. The benchmark gauge lost 3.2 percent this week, the most since March, as investors weighed valuations near the highest levels since 2009 and as concern resurfaced that the region remains vulnerable to shocks.

“The move looks overdone,” Ion-Marc Valahu, a cofounder and fund manager at Clairinvest in Geneva, wrote in an e-mail. “Banco Espirito Santo appears to be an isolated incident.”

National benchmark indices climbed in 13 of 18 western European markets. France’s CAC 40 added 0.4 percent, the UK’s FTSE 100 rose 0.3 percent and Germany’s DAX advanced less than 0.1 percent.

The STOXX 600 lost 3.6 percent in the past five days and Portugal’s PSI 20 Index plunged to a nine-month low on Friday after the parent of BES delayed making payments on some short-term debt. The bank disclosed an exposure of 1.18 billion euros (US$1.6 billion) to group companies.

The BES’ financial troubles are unlikely to have systemic implications for the euro area, Goldman Sachs Group Inc said in a note. Portuguese bank assets account for only 1.6 percent of the region’s total, foreign banks’ exposure to Portugal is low and the European Central Bank stands ready to support all banks, Goldman Sachs said.

Portugal has sufficient bank-recapitalization funds, and BES is not a threat to the country’s financial system, Barclays PLC analysts led by Antonio Garcia Pascual wrote in a note.

BES slid 5.5 percent to 0.481 euro, completing a weekly plunge of 36 percent, the biggest since at least 1993, according to data compiled by Bloomberg.

Imperial Tobacco gained 3.1 percent to £27.40. Reynolds, the producer of Camel cigarettes, said it is in talks to acquire Lorillard and the two partners are considering which parts of the combined business to sell to allay antitrust concerns.

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