Wednesday, Jul 18, 2012
By Sara Sjolin
Strong earnings from Credit Suisse Group AG and Nordea Bank AB enabled European stock markets to move into positive territory Wednesday, while strength from Wall Street gave equities a late-session boost.
The Stoxx Europe 600 index jumped 1.1% to 258.93, closing at its highest level since April 27.
"Earnings are the key thing we're focusing on right now. We've seen strong earnings from Nordic banks and Credit Suisse, and these are the kind of news that are keeping markets a little higher," said Morten Kongshaug, chief analyst at Danske Bank.
"We see very limited potential downside revision of earnings estimates," he added. "In 2011 after the summer, markets slumped almost 20% and we revised our earnings estimates for 2011 and 2012. For that trend, we are ahead of the curve, so in that sense there's not a lot of need for downside revisions."
Credit Suisse tallied one of the biggest gains in the pan-European index. Its shares rose 4.5%, as the bank reported a 3.6% increase in net profit for the second quarter and said it aims to boost capital by 15.3 billion Swiss francs ($15.6 billion) before the end of the year.
Sweden's Nordea Bank advanced 2.4% after reporting forecast-beating second-quarter results to continue a trend seen in the Nordic banking sector, where most earnings have exceeded market expectations.
Stocks in Europe extended gains in afternoon action after the U.S. market slowly climbed into positive territory, as U.S. Federal Reserve Chairman Ben Bernanke wrapped up his twice-a-year congressional testimony on the economic outlook.
In his second day of testimony the chairman reiterated his comments about the Fed's commitment to ease monetary policy if needed, but didn't detail any plans for further quantitative easing.
Ahead of the open on Wall Street, data showed housing starts in the U.S. in June rose at the fastest pace since fall 2008, beating analysts' expectations.
Better-than-expected unemployment data from the U.K. helped lift markets in midmorning action, as the jobless rate dropped to 8.1% for the three months ending in May.
"The U.K. is in many ways a parameter for the euro zone and we're looking at U.K. data for trends in the business cycle," Danske Bank's Kongshaug said. "We're seeing some optimism as people see things are turning in the U.K. as one of the first countries in Europe."
In addition, minutes from the Bank of England's July policy meeting showed seven of nine votes in favor of an increase in asset purchases, along with a unanimous vote to leave the key lending rate unchanged at 0.5%.
Stocks climbed in London with the FTSE 100 index rallying 1% to 5,685.77.
BHP Billiton PLC helped support the index, up 2%, after reporting a 12th consecutive annual production record from its iron ore operations in Western Australia.
HSBC Holdings PLC slipped 0.3%, as a key executive said Tuesday he would step down in response to a continuing U.S. government investigation into money laundering.
In Spain, some banks' shares fell after Societe Generale cut its earnings estimates for the country's banking sector by 12% on average and said it expects earnings to drop by 47% quarter-on-quarter.
In addition, data from the Bank of Spain showed the country's banks experienced a further reduction in deposits in May amid worries about the health of the financial sector.
Banco Popular Espanol SA slumped 1.7% and Banco de Sabadell SA fell 2.3%.
The IBEX 35 index gained 0.5% to 6,591.20.
Societe Generale further estimated that Italian banks would see earnings slashed by 75% for the quarter "due to weaker trading income and the absence of positive one-offs." Shares of Banca Monte dei Paschi di Siena SpA lost 2.8%, weighing on the FTSE MIB index, which underperformed most country-specific index and rose 0.4% to 13,594.39.
For the broader euro-zone crisis, the International Monetary Fund said the European Central Bank must continue to address the region's debt problems, which have reached a "critical stage."
In France, oil group Total SA added 1.9%, helping lift the CAC 40 index by 1.8% to 3,235.40.
Drug maker Sanofi SA also supported the index, up 3.6%, as it announced a research collaboration with Brigham and Women's Hospital focused on type 1 diabetes.
Among German stocks, pharmaceutical firm Merck KGaA rose 2.9%.
The DAX 30 index jumped 1.6% to 6,684.42.
Outside the main index in Frankfurt, Puma SE dropped 4.8% after revising its full-year forecast lower and saying earnings for the first half of 2012 are expected to drop 13% compared with the same period last year.
Among other notable movers in Europe, shares of Yara International ASA added 2.7%, as the Norwegian fertilizer producer reported a 26% rise in second-quarter earnings and said agricultural markets are strong.
Write to Sara Sjolin at AskNewswires@dowjones.com
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(END) Dow Jones Newswires
July 18, 2012 12:28 ET (16:28 GMT)