European equities mark year’s biggest weekly gain

Bloomberg

Sun, Nov 25, 2012 - Page 15

European stocks posted their biggest weekly rally of the year as speculation rose that the US Congress would agree on a budget that averts a fiscal cliff and preliminary data showed Chinese manufacturing expanded last month.

Nokia Oyj jumped 31 percent for the largest gain in two decades after reports its new Lumia smartphone sold out in Germany. Alcatel-Lucent SA surged 13 percent as people familiar with the matter said it was in financing talks with Goldman Sachs Group Inc.

The benchmark STOXX Europe 600 Index soared 4 percent to 273.33 this week. That is the biggest advance since Dec. 2 and the first time the gauge has gained every day of the week since July 1 last year. The measure has increased 17 percent from this year’s low on June 4 as the European Central Bank agreed on an unlimited bond-buying plan and the US Federal Reserve started a third round of asset purchases in the US.

The news from the US and China “has probably helped investors reconsider their allocation to equity markets,” said Pierre Mouton, a portfolio manager at Notz, Stucki & Cie in Geneva. “It has been a nice ride after a difficult four weeks. There’s a chance that we will see less macro concerns in the short term, and maybe more stock picking.”

The STOXX 600 lost 4.3 percent through Nov. 16 following US President Barack Obama’s Nov. 6 re-election as traders turned their focus to the US$607 billion of tax increases and spending cuts that come into force next year if congress does not act.

Obama said at a press conference in Bangkok on Friday last week that he was “confident” of striking a deal over a new budget. US House Speaker John Boehner, a Republican, said after the close of European trading on Friday last week that he held constructive talks with the president and would accept increased government revenue and spending cuts. Congress returns tomorrow after the Thanksgiving recess.

In China, the preliminary reading for a purchasing managers’ index increased to 50.4 this month from a final figure of 49.5 last month, according to a release by HSBC Holdings PLC and Markit Economics. The reading climbed above 50 for the first time in 13 months, signaling expansion.

Euro-area factory output contracted less than economists had estimated this month, a Markit Economics report on Thursday showed. The index based on a purchase managers’ survey climbed to 46.2 from 45.4 last month, beating the average economist estimate of 45.6 in a Bloomberg survey.

In Germany, the Ifo institute said its business climate index, based on a survey of 7,000 executives, increased to 101.4 from 100 last month, the first gain in eight months. Economists predicted a drop to 99.5, according to the median estimate of economists in a Bloomberg News survey.

National benchmark indexes increased in all of the 18 western European markets this week, except Iceland. The UK’s FTSE 100 rose 3.8 percent, France’s CAC 40 added 5.6 percent and Germany’s DAX Index climbed 5.2 percent.