European stocks hold, economy shrinks

EUROPEAN TRAGEDY::Eurozone ministers met again to discuss more aid for Greece as GDP fell 0.6 percent from the previous three months


Sun, Feb 17, 2013 - Page 6

European stocks were unchanged this week, halting a two-week decline, as better-than-estimated results from ABB Ltd to PSA Peugeot Citroen offset a deeper- than-forecast contraction in the economy.

The STOXX Europe 600 Index was unchanged this week at 287.34. It fell 0.8 percent the previous two weeks as political uncertainty in Italy and Spain sent the nations’ bond yields higher. The gauge has still climbed 2.7 percent this year after US lawmakers agreed on a compromise budget.

“The growth outlook is improving, the liquidity backdrop is still supportive, earnings are robust and equity valuations are reasonable,” said Abi Oladimeji, who helps oversee US$4.3 billion as head of investment strategy at Thomas Miller Investment Ltd in London. “However, there are some short-term concerns that we are looking at. Markets appear to be overbought and the technicals are looking quite stretched.”

The STOXX 600 is trading at 12.3 times its companies’ estimated earnings, compared with an average of 11.5 over the past five years, according to data compiled by Bloomberg. The VSTOXX Index, which measures the expected volatility in the region through Euro STOXX 50 Index options prices, rose 1.6 percent this week.

A report this week showed the eurozone economy shrank more than forecast in the fourth quarter. GDP fell 0.6 percent from the previous three months, compared with the median estimate in a Bloomberg survey of economists for a contraction of 0.4 percent.

Ministers from the 17-member eurozone met during the week to discuss aid to Cyprus and Greece as a tightening election contest in Italy and a political scandal in Spain threatened to reignite the region’s debt crisis. G20 finance ministers and central bankers began gathering in Moscow on Friday to find some common ground on currencies.

National benchmark indexes climbed in 10 of the 18 western European markets. The UK’s FTSE 100 climbed 1 percent and France’s CAC 40 added 0.3 percent. Germany’s DAX fell 0.8 percent, while Denmark’s OMX Copenhagen 20 slumped 4.5 percent as Novo Nordisk A/S, which makes up 43 percent of the gauge, sank 11 percent after US regulators rejected its new insulin.

About 54 percent of companies in the Stoxx 600 reported earnings that topped analysts’ estimates this week, according to data compiled by Bloomberg.

ABB surged 8.8 percent, the biggest increase since December 2011. The Zurich-based company reported better-than-estimated earnings, helped by rising orders in the US, the Middle East and Africa.