In Europe: European Stocks Climb Amid ECB Support Hope

8 December 2011

Uncertainty begins to creep again as we await “early and significant additional policy from the ECB on bond buying.”

European stocks were little changed as investors awaited a meeting of the European Central Bank for indications on whether it will unveil measures to boost the economy. U.S. index futures and Asian shares fell.

Banco Sabadell SA climbed 5 percent after agreeing to buy stricken Spanish lender Caja de Ahorros del Mediterraneo. BNP Paribas (BNP) SA added 1 percent before the result of tests from banking regulators. Kazakhmys Plc (KAZ) and Antofagasta Plc (ANTO) gained after Nomura Holdings Inc. upgraded the mining companies.

The benchmark Stoxx Europe 600 Index advanced less than 0.1 percent to 241.56 at 10:52 a.m. in London, having earlier risen as much as 0.8 percent. The measure posted its biggest rally since November 2008 last week as central banks lowered the interest rate on dollar funding andChina reduced its reserve ratio for banks.

“A rate cut of at least 25 basis points is expected from the ECB, but what may be more important is what will be said at the press conference,” said Robert Talbut, who helps oversee about $70 billion as chief investment officer at Royal London Asset Management Ltd. “We’re looking for words that the summit will bring forward early and significant additional policy from the ECB on bond buying. People will be hanging onto the words of any policy makers in the next 48 hours.”

The Stoxx 600 slipped 0.2 percent yesterday after Germany rejected combining the current and permanent euro-area rescue funds and expressed pessimism over the outcome of the European Union summit that starts today in Brussels.

U.S., Asian Shares

Futures on the Standard & Poor’s 500 Index fell 0.3 percent today, while the MSCI Asia Pacific Index dropped 0.5 percent after data on Japanese machinery orders and Australian employment missed forecasts.

ECB policy makers meeting in Frankfurt will cut the benchmark interest rate by a quarter percentage point to 1 percent, according to 53 of 58 economists in a Bloomberg News survey. They may also loosen collateral criteria to give banks greater access to cheap cash and offer longer-term loans, said three euro-area officials with knowledge of the deliberations.

The ECB announces its rate decision at 1:45 p.m. in Frankfurt and President Mario Draghi holds a press conference 45 minutes later. European Union leaders will meet for dinner at 7.30 p.m. in Brussels for talks on a “comprehensive” solution to the region’s debt crisis that will continue tomorrow.

Bullish Options

Options traders are pushing bullish bets on Europe to the highest level since March 2010 as governments work to forge a solution to the debt crisis. The ratio of outstanding calls to buy the Euro Stoxx 50 Index versus puts to sell has climbed to a 20-month high of 0.92-to-1, according to data compiled by Bloomberg.

Sabadell (SAB) rose 5 percent to 2.88 euros. The bank agreed to acquire CAM for one euro in a deal financed and guaranteed by Spain’s commercial lenders as an effort to shield the national budget from losses. Sabadell said the purchase will save it more than 300 million euros ($402 million) a year, increase its client base to 5 million and boost per-share earnings.

BNP Paribas, the biggest French bank, advanced 1 percent to 33.64 euros. Results of tests from the European banking regulator released after the close of trading today will show French lenders’ capital shortfall shrank from the October estimate of 8.8 billion euros, a person with direct knowledge of the matter said.

Kazakhmys, Antofagasta

Kazakhmys increased 1.8 percent to 957.5 pence as Nomura raised its rating on the shares to “neutral” from “reduce,” while ING Groep NV initiated coverage advising clients to buy the stock.

Antofagasta advanced 1.3 percent to 1,246 pence as Nomura raised its recommendation on the copper miner controlled by Chile’s Luksic family to “buy.”

Tesco Plc (TSCO) slipped 1.2 percent to 392.35 pence, a third day of losses. The U.K.’s largest supermarket chain said a sales decline continued in the third quarter as increased joblessness and rising fuel and food bills weighed on consumer spending. Revenue at U.K. stores open at least a year fell 0.9 percent in the three months ended Nov. 26, excluding fuel and value-added tax.

BioMerieux (BIM) SA slid 5.8 percent to 58.35 euros in Paris as the maker of tests for HIV and hepatitis said it may not meet its sales-growth target.


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