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Sun, Dec 14, 2008 - Page 10 News List

European stocks post weekly gains amid speculation

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GRAPHIC: AP

European stocks rose last week, led by construction companies and commodity producers, on speculation a US stimulus plan will prevent a prolonged recession in the world’s largest economy.

Lafarge SA, the biggest cement maker, and Holcim Ltd climbed at least 11 percent as US president-elect Barack Obama said he was planning the most extensive public-works spending package since the 1950s.

Rio Tinto Group, the third-largest mining company, surged 42 percent after saying it will reduce debt. Gains in the Dow Jones Stoxx 600 Index were limited after the Senate rejected a US$14 billion plan to rescue US carmakers.

The STOXX 600 added 4.4 percent to 198.22, bringing the rebound from this year’s low last month to 8.8 percent as governments from the US to India announced packages to buoy the global economy and prevent earnings from tumbling.

“Stimulus plans offer oxygen as we face an accumulation of bad news,” said Pierre Nebout, a fund manager at Edmond de Rothschild Asset Management in Paris, which oversees US$3.9 billion in stocks.

“The market welcomes them,” he said in a Bloomberg Television interview.

The STOXX 600 has tumbled 46 percent this year as almost US$1 trillion in bank losses and writedowns froze credit markets and pushed the US, Europe and Japan into the first simultaneous recessions since World War II.

National benchmark indexes rose in all 18 western European markets this week except Iceland.

Germany’s DAX Index added 6.4 percent. France’s CAC 40 climbed 7.6 percent and the UK’s FTSE 100 increased 5.7 percent.

Lafarge gained 11 percent.

Holcim, the world’s second-biggest cement maker, advanced 19 percent. Lafarge gets 24 percent of its sales in North America, while Holcim generates almost 20 percent of revenue there.

Obama said on Dec. 6 he would boost investment in roads, bridges and public buildings to create and preserve 2.5 million jobs.

That’s the largest public works program since US president Dwight Eisenhower created the interstate highway system.

Mining stocks climbed 17 percent as a group this week, the best-performing industry in the STOXX 600.

Rio Tinto surged 42 percent after the company said it would cut 14,000 jobs and slash spending next year to reduce debt as the global financial crisis curbs demand for metals.

Lonmin Plc, the third-largest platinum producer, and Vedanta Resources Inc, the mining company controlled by billionaire Anil Agarwal, each soared 29 percent.

The STOXX 600 pared its weekly gain, losing 2.7 percent on Friday after the US Senate’s rejection of a rescue for carmakers in the US.

The bailout plan was thwarted when a bid to cut off debate on the bill the House passed on Thursday fell short of the required 60 votes.

The Bush administration will “evaluate our options in light of the breakdown in Congress,” spokesman Tony Fratto said.

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