European equities rally on US debt limit agreement


Sun, Oct 20, 2013 - Page 15

European stocks rallied for a second week as Republicans and Democrats agreed to raise the US sovereign-debt ceiling and reopen the federal government.

Hargreaves Lansdown PLC climbed to its highest since its initial public offering in 2007, posting the best performance on the STOXX Europe 600 Index this week. Man Group PLC jumped 10 percent after the world’s largest publicly traded hedge-fund manager posted its first quarterly net inflows in two years. PSA Peugeot Citroen slumped 13 percent as the company was said to consider selling shares to increase its capital.

The STOXX 600 advanced 2.2 percent to 318.47 this week. The equity benchmark has climbed for seven consecutive days, its longest winning streak this year. The gauge has risen 2.6 percent so far this month amid optimism that the US Congress would increase the limit before the deadline on Thursday. That extended the rally this year to 14 percent.

“The last-minute deal was widely expected by the markets, which was reflected in this week’s movements,” said Benedict Goette, CEO of Compass Capital AG in Zurich. “We may see an extension of the benign dynamic we currently seem to be in. The market will postpone any second thought on the US budget divide until its next deadline.”

National benchmark indices advanced in every Western European market except Iceland this week. Germany’s DAX and France’s CAC 40 rose 1.6 percent, while the UK’s FTSE 100 gained 2.1 percent.

US President Barack Obama on Thursday signed into law a measure to extend the nation’s borrowing authority into early next year and end the government shutdown that started on Oct. 1.

Investors were also encouraged by US Federal Reserve Bank of Chicago President Charles Evans’ comment on Thursday that the Fed should not begin reducing the pace of its US$85 billion monthly asset purchases because the government stopped publishing the data used to gauge the economy’s health during the shutdown.

Market optimism also rose on reports that the Chinese economy accelerated in the third quarter, with GDP rising 7.8 percent from a year earlier, the National Bureau of Statistics said on Friday. A separate release showed that industrial production advanced last month by 10.2 percent, matching economists’ estimates.