European stocks rose for a third straight week after Standard & Poor’s said it was no longer planning an imminent downgrade of Greece’s debt and as the US Federal Reserve repeated a pledge to maintain record-low borrowing costs for an extended period.
UniCredit SpA gained 4.7 percent after Italy’s biggest bank posted earnings that beat estimates. Lloyds Banking Group PLC rallied after saying it may be profitable this year. Arriva PLC jumped 24 percent after the operator of Britain’s longest rail route said it received a takeover approach.
The STOXX Europe 600 Index gained 0.7 percent to 260.20, a third straight weekly advance. The measure retreated for the first two months of 2010 amid concern that Greece will struggle to rein in Europe’s biggest budget deficit.
“We were strongly caught in uncertainty over Greece, which hasn’t gone away but has brightened up,” said Rolf Biland, Zurich-based chief investment officer at VZ Vermoegenszentrum, which oversees about US$5.7 billion. “Markets are reacting again to the state of the economy and debt concerns have moved to the background. In the short-term we may see the recovery continue.”
Greece had the threat of a cut to its credit rating reduced by S&P, which cited the country’s efforts to narrow a budget deficit that is more than four times the EU’s 3 percent limit. S&P affirmed the nation’s BBB+ rating, removing it from “creditwatch negative,” meaning the company is no longer considering an imminent reduction to the grade.
Officials from the 16 countries using the euro this week worked out a strategy for emergency loans in case Greece’s plan for 4.8 billion euros (US$6.6 billion) in tax increases and wage cuts fails to bring the deficit under control.
Acting Dutch Finance Minister Jan Kees de Jager said the IMF “will probably do part” of Greece’s financing needs. The EU said that “all EU states” are determined to help Greece if needed.
The STOXX 600 has surged 65 percent since March 9 last year as governments and central banks around the world maintained low interest rates and committed more than US$12 trillion to stimulate the economy.
The Fed said low rates were still needed to drive the world’s largest economy. The US central bank also said the labor market is stabilizing and business spending has risen, while inflation remains subdued.
National benchmark indexes rose in 12 out of 18 western European markets. The UK’s FTSE 100 rose 0.4 percent and Germany’s DAX advanced 0.6 percent, while France’s CAC 40 dropped 0.1 percent. Greece’s ASE Index slid 3.1 percent as the nation’s banks tumbled.