European Stocks Climb to Three-Week High Amid Company Earnings

Apr 29, 2014 12:09 pm ET

April 29 (Bloomberg) -- European stocks rose to a three- week high as companies from Deutsche Bank AG to Statoil ASA reported earnings that beat estimates.

Deutsche Bank climbed 2.2 percent after Europe’s largest investment bank said first-quarter profit dropped less than projected. Statoil gained 4.5 percent. Nokia Oyj gained 2.9 percent after naming a new chief executive officer and saying it will spend about 5 billion euros ($6.9 billion) on dividends, share buybacks and debt reduction. ABB Ltd. fell the most in four years after the world’s largest maker of power transformers posted quarterly profit that missed estimates.

The Stoxx Europe 600 Index rallied 1.2 percent, the most in a week, to 338.12 at the close of trading in London. The benchmark measure advanced yesterday as companies from AstraZeneca Plc to Bayer AG rose amid an increase in mergers- and-acquisitions activity, offsetting new U.S. sanctions against Russian individuals and companies.

“There were a lot of earnings reports,” Ricciardo Ricciardelli, founder and managing director at Fero Capital in Dubai, said by telephone. “Most of the figures were fine, except for ABB, which reported poorly. Ukraine is definitely one of the big challenges to stability, but the markets haven’t adjusted for the implications of a real conflict.”

Economic confidence in the euro area unexpectedly slipped in April, while a final consumer-confidence reading came in at minus 8.6, better than initially estimated. Separate data showed U.K. gross domestic product expanded 0.8 percent in the first quarter from the final three months of 2013, when it grew 0.7 percent, according to the Office for National Statistics.

Fed Meeting

The Federal Reserve begins a two-day policy meeting today, where it will probably cut bond buying to $45 billion, according to the median of 43 economists’ estimates compiled by Bloomberg. The central bank is winding down the most aggressive easing in its 100-year history and reduced asset purchases in March to a monthly pace of $55 billion from $85 billion in December, preparing to eventually raise the federal funds rate for the first time since 2006.

The volume of shares traded in Stoxx 600 companies was 11 percent lower than the 30-day average, according to data compiled by Bloomberg. National benchmark indexes advanced in every western-European market today except Iceland. France’s CAC 40 gained 0.8 percent to its highest level since September 2008. Germany’s DAX rose 1.5 percent, and the U.K.’s FTSE 100 increased 1 percent.

Deutsche Bank climbed 2.2 percent to 32.11 euros. Net income fell 34 percent to 1.08 billion euros in the three months through March from a year earlier. That compared with the 1.01 billion-euro average of 10 analyst estimates compiled by Bloomberg. Revenue from trading fixed income, currencies and other products dropped 10 percent to 2.43 billion euros, beating the 2.12 billion-euro average of nine projections.

Nordea Bank

Nordea Bank AB increased 3.7 percent to 93.95 kronor, the highest price since at least 1997. The Nordic region’s largest lender said profit rose 4.7 percent in the first quarter as it cut costs and had fewer losses on its loans. Net income was 831 million euros, compared with the average analyst projection of 850 million euros.

Statoil advanced 4.5 percent to 181.50 kroner. Norway’s biggest energy company said adjusted net income rose to 15.8 billion kroner ($2.6 billion) from 12 billion kroner a year earlier, beating the 12.4 billion-krone estimate.

Nokia gained 2.9 percent to 5.29 euros. The company named Rajeev Suri CEO, picking the head of its networks division to chart the company’s future and revive growth after selling its mobile-phone business to Microsoft Corp. Nokia forecast second- half networks sales will grow from last year.

Telecity Start

Telecity Group Plc surged 15 percent, the most since January 2009, to 728 pence. The data-center operator said 2014 had a good start, with revenue growth accelerating to 9.4 percent in the first quarter.

Orange SA climbed 3.3 percent to 11.20 euros. France’s largest phone company halted a decline in profitability, cutting wireless subsidies and labor costs. First-quarter sales slid 4.6 percent to 9.8 billion euros from a contraction of 5.8 percent during the whole of 2013. Earnings before interest, taxes, depreciation and amortization fell 3.4 percent to 3 billion euros, giving the Paris-based carrier a profit margin of 30.8 percent during the quarter.

Geberit AG rallied 5.5 percent to 297.50 Swiss francs, the highest price since its initial public offering in June 1999. The maker of toilet flushes and bathroom piping reported first- quarter earnings before interest and taxes increased to 163.2 million francs ($185.5 million) from 137 million francs.

ABB Falls

ABB slumped 7 percent to 21.43 francs. A weak performance in the Power Systems unit and charges related to building offshore wind and solar plants dragged on earnings. First- quarter net income fell 18 percent to $544 million. The average estimate of 12 analysts was for $719 million. Sales declined 3 percent to $9.5 billion, also missing projections.

Serco Group Plc sank 15 percent to 343.8 pence, the lowest price since October 2008. The operator of London’s Docklands Light Railway said yesterday after the close that it may make a “material downward revision” to its outlook and sell shares. The U.K. company was cut to neutral from buy at Citigroup Inc., while JPMorgan Chase & Co. said Serco may lower its operating- profit forecast by at least 10 percent.

PSA Peugeot Citroen dropped 2.4 percent to 12.73 euros, paring earlier declines after MSCI Inc. said it will add the stock to its standard and mid-cap indexes, effective May 5.

Europe’s second-biggest carmaker lost as much as 9.6 percent today as it said it’s offering stock to investors at 6.77 euros a share, after selling stakes to Chinese partner Dongfeng Motor Corp. and the French state to fund a turnaround.

The shares traded today without the right to warrants that Peugeot said earlier this year would be issued in a 770 million- euro sale at a ratio of one warrant per existing share. Those securities cost 1.59 euros each today.

--With assistance from Namitha Jagadeesh in London.