European stocks climbed, sending the Dow Jones Stoxx 600 Index to its fourth straight gain, as investors speculated government efforts to shore up banks and the economy will support profits.
Barclays Plc and Siemens AG rallied more than 4 percent. President-elect Barack Obama yesterday picked former Federal Reserve Chairman Paul Volcker to head an economic advisory board and said he will implement a plan to bolster growth on “day one.” Air Berlin Plc advanced 15 percent after posting a better- than-estimated 43 percent jump in third-quarter profit.
The Stoxx 600 added 2.4 percent to 203.62, extending this week’s gain to 12 percent. The index is still down 44 percent in 2008, headed for its worst year since records began in 1987, as economies from Germany and the U.K. to the U.S. slip into recession.
“Investors see the market as discounting a truly cataclysmic event,” said Chirin Gill, a London-based fund manager at Daiwa SB Investments, which has about $60 billion. “They are gaining reassurance from governments and central banks who are beginning to understand the severity of the situation.”
Stocks rallied worldwide this week after China cut borrowing costs by the most in 11 years and the Federal Reserve’s pledge to buy $600 billion of debt sent mortgage rates down by the most in at least seven years.
Citigroup Inc. has jumped 87 percent since the U.S. government injected $20 billion of capital into the bank at the start of the week and guaranteed $306 billion of its mortgages and other troubled loans.
‘Reached a Bottom’
More than $30 trillion has been wiped off the value of global equities this year as credit losses and writedowns approached $1 trillion in the worst financial crisis since the Great Depression.
National benchmark indexes rose in all 18 western European markets today. The FTSE 100 gained 1.8 percent. Germany’s DAX added 2.3 percent as Allianz SE and Daimler AG advanced. France’s CAC 40 increased 2.5 percent, led higher by BNP Paribas SA.
“We have reached a bottom,” said Jacques Porta, who helps manage $180 million at Ofivalmo Patrimoine in Paris and has been buying shares of Hewlett-Packard Co. and Alstom SA. “There is a slight change of feeling in the newsflow we are getting, relative to what we saw in October. The problems are far from over, but the newsflow is more constructive.”
Banks and insurers shares were among the best performers in the Stoxx 600 today. Barclays added 4.3 percent to 166.9 pence. Allianz, Europe’s second-biggest insurer by market value, rallied 10 percent to 59.81 euros. BNP, France’s largest bank, rose 7.4 percent to 43.40 euros.
U.S. Sales
Siemens paced gains among companies that generate a large proportion of sales in North America. Europe’s largest engineering company, which relies on the U.S. for about 21 percent of its revenue, rose 4.6 percent to 48.93 euros. Daimler AG, the world’s second-biggest maker of luxury cars, advanced 3.6 percent to 25.58 euros.
Analysts have slashed earnings estimates this year as the credit turmoil spread. Profit for companies in the Stoxx 600 will slide 12 percent on average in 2008, compared with 11 percent growth forecast at the start of the year, Bloomberg data show.
“We are not that brave yet” to buy stocks, said Alan Beaney, who manages about $2 billion as head of investments at Principal Investment Management in Leeds, England. “Analysts’ expectations for profit forecasts are too high. We need to see these earnings numbers come down,” he told Bloomberg Television.
Earnings for the 325 companies in the Stoxx 600 that have reported results since Oct. 7 declined 15 percent on average, trailing expectations by 6.3 percent, Bloomberg data show.
Air Berlin
Air Berlin surged 15 percent to 3.46 euros. Europe’s third- biggest discount airline reported earnings before interest and taxes of 89.1 million euros ($115 million), beating analysts’ expectations of 71.9 million euros.
Irish Life & Permanent Plc and Allied Irish Banks Plc rallied after the Irish Association of Investment Managers approached the government about investing in the country’s banks to boost Tier 1 capital ratios. The ratio indicates a bank’s ability to cushion bad debts.
Irish Life & Permanent, the nation’s largest mortgage lender, soared 20 percent to 1.64 euros. Allied Irish Banks, the biggest bank by value, climbed 15 percent to 2.77 euros.
Separately, the Irish Times reported today that U.S. private equity companies Texas Pacific Group and Kohlberg Kravis Roberts have held talks with Bank of Ireland about a possible investment. The bank was already contacted by a consortium that includes J.C. Flowers & Co, the newspaper said.
ArcelorMittal added 5.8 percent to 19.85 euros. The world’s largest steelmaker said it may cut as many as 9,000 jobs globally after reducing output on falling demand.
Kingfisher Plc dropped 2.4 percent to 116.6 pence after Europe’s biggest home-improvement retailer said consumer confidence has been “shaken” in all its markets and reported a 4 percent decline in third-quarter profit.
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