European stocks had their first weekly gain since May after US banks including Citigroup Inc reported earnings that beat estimates and a more than 10 percent decline in oil prices boosted automakers and travel companies.
Anglo Irish Bank PLC and Swedbank AB led banks higher after Citigroup, the biggest US bank by assets, posted a smaller-than-estimated second-quarter loss. Ryanair Holdings PLC, Europe’s biggest discount airline, and Volkswagen AG rallied as oil had its steepest weekly drop in more than three years. Alliance & Leicester PLC surged after Banco Santander SA agreed to buy the UK lender.
Europe’s Dow Jones STOXX 600 Index rose 3.8 percent in the week to 280.69, reducing its loss so far this year to 23 percent. The MSCI World Index slid into a bear market last week as oil rose to a record and Fannie Mae and Freddie Mac, the two biggest mortgage-finance companies, plunged on concern they didn’t have enough capital to survive the housing slump.
“The panic we saw at the beginning of this week gave way to a more realistic view that the banking apparatus won’t break down,” said Robert Halver, head of research at Baader Bank in Frankfurt.
“The decline in oil prices and takeovers supported the market,” said Stefan Raetzer, a fund manager at Allianz Global Investors in Frankfurt, who helps oversee US$28 billion. “What we saw was investors shifting from those sectors that have performed very well recently, like basic resources, to those that have suffered a lot, including automakers.”
National benchmarks gained in 15 of the 18 western European markets. Germany’s DAX Index added 3.7 percent, and France’s CAC increased 4.9 percent.
The UK’s FTSE 100 advanced 2.2 percent. The STOXX 50 added 2.9 percent and the Euro STOXX 50, a measure for the euro region, increased 3.9 percent.
European banking shares posted their first weekly gain in 11 weeks, with the benchmark for the industry rising 9.4 percent.
Anglo Irish, Ireland’s third-largest bank, climbed 22 percent and Bank of Ireland PLC, the country’s second-largest bank by market value, jumped 20 percent.
Ireland’s banks are “very well capitalized” and don’t need government aid even after a housing slump sent shares to the lowest in more than a decade, Irish Prime Minister Brian Cowen said in a Bloomberg Television interview in New York on Thursday.
Swedbank surged 22 percent. The largest bank in the Baltics reported second-quarter profit increased 16 percent after lending income rose in Sweden, Estonia, Latvia and Lithuania.
“The market seems oversold globally,” said Franz Wenzel, Paris-based deputy director for investment strategy at Axa Investment Managers, which oversees about US$831 billion. “We need the leader of the pack — the US. Without it, we’re going nowhere. The most important thing in the US is earnings.”
Ryanair increased 27 percent this week and British Airways PLC, Europe’s third-biggest carrier, gained 22 percent following oil’s slide.
Volkswagen, Europe’s largest carmaker, rose 12 percent. Renault SA, France’s second-biggest auto producer, climbed 14 percent.
Alliance & Leicester jumped 50 percent. Banco Santander, Spain’s biggest bank, agreed to acquire the UK mortgage lender for £1.26 billion (US$2.6 billion), less than half the company’s market value at the end of last year.
Continental AG added 33 percent. Europe’s second-biggest tiremaker received an unsolicited 11.2 billion-euro (US$17.7 billion) takeover approach from Schaeffler Group.
Schaeffler, an engineering company owned by billionaire Maria-Elisabeth Schaeffler and her family, offered at least 69.37 euros a share and said it’s seeking a minority stake, a strategy that would echo Porsche SE’s purchase of 31 percent of Volkswagen AG last year.
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