European stocks climbed for a third time in four weeks as oil dropped to a three-month low and earnings from Societe Generale SA and Royal Bank of Scotland Group PLC eased concern that banks need more capital.
Marks & Spencer Group PLC, Daimler AG and Air France-KLM rose after crude oil fell more than US$7 a barrel. Societe Generale, France’s second-largest bank, rallied the most in six months on a smaller-than-estimated profit decline. Royal Bank of Scotland, the second-biggest UK bank, rose 12 percent. European Aeronautic Defence & Space Co gained the most in seven years as the euro fell to the lowest versus the dollar since February.
Europe’s Dow Jones STOXX 600 Index added 3.2 percent this week to 289.28, the highest level since June 30. The measure has climbed 8.5 percent from an almost three-year low on July 15 as crude tumbled more than 20 percent from a record and profits from Credit Suisse Group AG to Air France-KLM and Adidas AG beat analysts’ estimates.
“Much of the market had been sold off aggressively ahead of first-half results and we were due a bounce,” said Jane Coffey, head of equities at Royal London Asset Management, which oversees about US$63 billion. “A weakening oil price will allow central banks to be less concerned about inflation. This makes equities look more attractive.”
This week’s rally pared the STOXX 600’s decline this year to 21 percent. The benchmark index for European equities has dropped in eight of the previous nine months as asset writedowns and credit losses at banks approached US$500 billion worldwide, threatening to prolong the slowdown in global economic growth.
National benchmark indexes advanced in 15 of the 18 western European markets in the week. France’s CAC 40 gained 4.1 percent. The UK’s FTSE 100 added 2.5 percent, while Germany’s DAX climbed 2.6 percent.
Marks & Spencer, the UK’s largest clothing retailer, rallied 9 percent.
Daimler, the world’s second-biggest maker of luxury cars, increased 14 percent.
“The decline in oil was a critical factor,” said Gregor Logan, the co-chief investment officer at New Star Asset Management in London, which oversees about US$41 billion.
Air France, Europe’s biggest airline, increased 13 percent. The carrier got an added boost this week after reporting first-quarter profit that exceeded analysts’ projections.
Societe Generale jumped 15 percent. The bank said net income fell 63 percent to 644 million euros (US$1 billion), compared with the 550 million-euro median estimate of 13 analysts surveyed by Bloomberg.
The company’s capital position is “completely solid,” chief executive officer Frederic Oudea said.
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