European stocks advanced for a second week, with the Dow Jones STOXX 600 Index extending a six-month rally, as economic reports spurred speculation that company earnings will improve amid a global recovery.
Allied Irish Banks PLC soared 28 percent after saying it will sell property loans to the country’s so-called bad bank and raise about 2 billion euros (US$2.9 billion) in capital. Danisco A/S jumped 19 percent as the Nordic region’s biggest food ingredient maker reported first-quarter earnings that topped estimates and raised its full-year forecasts.
The STOXX 600 added 1.3 percent to 244.92, as all 15 out of 19 industry groups advanced. A 55 percent rally since March 9 has pushed the regional gauge to an 11-month high as results at companies from Goldman Sachs Group Inc to Roche Holding AG surpassed projections and the German and French economies unexpectedly exited recessions.
“We have confidence in top-line growth coming through because we’ve seen the macroeconomic data tell us there is actually growth in these economies now,” said Nick Nelson, a European equity strategist at UBS AG in London. “Corporate profits are providing you with the reason to get more constructive on stocks.”
Earnings for companies in the STOXX 600 are forecast to rise 4.3 percent this year and 29 percent next year, weekly data compiled by Bloomberg showed.
Reports this week showed the number of Americans filing first-time claims for jobless benefits fell unexpectedly last week, while builders in the US broke ground last month on the most houses in nine months and manufacturing in the Philadelphia region expanded this month for a second month.
US Fed Chairman Ben Bernanke said on Tueaday that the worst US recession since the 1930s had probably ended, while warning that growth may not be strong enough to quickly reduce the unemployment rate.
Berkshire Hathaway Inc chairman Warren Buffett said at a conference in California last week that his company was buying equities, while billionaire investor Kenneth Fisher said in an interview that global stocks are in the middle of a “V-shaped recovery,” led by emerging markets, that will last for at least another six months.
National benchmark indexes advanced in all 18 western European markets except Iceland. The UK’s FTSE 100 rallied 3.2 percent and Germany’s DAX added 1.4 percent. France’s CAC 40 increased 2.5 percent.
Ireland’s ISEQ Index rallied 6.1 percent, led by Allied Irish and Bank of Ireland PLC. Ireland’s National Asset Management Agency will buy loans with a combined book value of 40 billion euros from the two banks as the government seeks to purge them of souring assets.
Allied Irish said it may tap new and existing investors for capital as well as selling some assets to raise the 2 billion euros. Bank of Ireland shares climbed 20 percent.
Tueaday saw the one-year anniversary of Lehman Brothers Holdings Inc’s bankruptcy filing, which exacerbated the credit crunch and helped drag the global economy into its worst slowdown since World War II.
Losses at the world’s biggest financial institutions since the start of 2007 have widened to more than US$1.6 trillion.
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