European Stocks Gain Sixth Week on Euro Confidence, China Output

May 23, 2014 6:01 pm ET

May 24 (Bloomberg) -- European stocks advanced for a sixth week as a gauge of euro-area confidence increased more than forecast, amid better-than-estimated manufacturing data from China and the U.S.

Ryanair Holdings Plc climbed 13 percent after predicting a return to profit growth this year. Daily Mail and General Trust Plc jumped 11 percent after announcing an initial public offering for its Zoopla Property Group. German utilities EON SE and RWE AG advanced more than 7 percent after RBC Capital Markets raised its recommendations on the stocks on expectations of tax refunds. Royal Mail Plc slid 8 percent after reporting profit that missed estimates.

The Stoxx Europe 600 Index rose 0.8 percent this week to 341.76, for its longest streak of weekly gains since November, and just off its highest level since January 2008, reached on May 13. The benchmark index traded at 15.3 times the projected earnings of its members at the end of the week, up from about 13.8 times in January.

“It has been really encouraging for investors to see these numbers coming in, especially the consumer confidence figures rising to the highest levels in several years,” Peter Garnry, head of equity strategy at Saxo Bank A/S in Hellerup, Denmark, said in a phone interview. “China was a pleasant surprise because data has been weak lately. We would expect confidence to continue to accelerate which will be positive GDP-wise for Europe. This data confirms that the euro zone is slowly pulling itself out of the mud, though it is still at a slow pace.”

National benchmark indexes advanced in 16 of the 18 western-European markets this week. France’s CAC 40 gained 0.8 percent, Germany’s DAX added 1.4 percent, while the FTSE 100 slipped 0.6 percent.

European Confidence

A gauge of household confidence in the euro zone rose to minus 7.1 in May, the highest since October 2007, from minus 8.6 in April, the European Commission in Brussels said in a preliminary report on May 21. That beat the median forecast of minus 8.3 in a Bloomberg News survey of 23 economists.

In China, a preliminary purchasing managers’ index from HSBC Holdings Plc and Markit Economics rose to 49.7 in May, a five-month high. That beat the 48.3 median estimate of analysts surveyed by Bloomberg News. April’s final reading was at 48.1. Readings below 50 signal contraction.

In the U.S., a separate report from Markit showed a measure of manufacturing in the world’s biggest economy rose to 56.2 in May from 55.4 in April, surpassing the 55.5 reading projected by economists in a Bloomberg survey. A similar gauge for the euro area fell to 52.5 this month from 53.4 in April, missing the average analyst estimate of 53.2.

Ryanair Climbs

Ryanair advanced 13 percent in London. Europe’s biggest discount airline said profit after tax probably will be 580 million euros ($790 million) to 620 million euros for the year through March 2015, a gain of as much as 19 percent. Earnings after tax last year fell 8 percent to 523 million euros. That compared with the average analyst estimate of 521 million euros.

Daily Mail and General Trust surged 11 percent after announcing the IPO of its 52.6 percent-owned Zoopla Property operation, which owns real estate websites. Daily Mail will probably remain the largest stockholder, according to Zoopla Chief Executive Officer Alex Chesterman.

EON climbed 7.5 percent after RBC raised its recommendation on the shares to outperform, similar to buy, from underperform. RWE advanced 9 percent after RBC upgraded the shares to sector perform, from underperform.

Analysts led by John Musk wrote that they expect a Munich court to suspend the payment of a nuclear-fuel tax by utilities and order a refund of taxes already paid. That decision, combined with a similar ruling by Hamburg’s finance court recently, will provide a one-time boost to the earnings and profitability of EON and RWE, they wrote.

BTG Gains

BTG Plc added 13 percent. The biotechnology company said the U.S. Food and Drug Administration approved its EkoSonic Endovascular System for treating pulmonary embolism.

DCC Plc jumped 12 percent. The Irish distribution company posted full-year adjusted earnings per share of 191.2 pence, beating the average analyst projection of 185 pence.

AstraZeneca Plc tumbled 10 percent after rejecting an increased bid from Pfizer Inc. of 55 pounds ($92.51) a share. The London-based drugmaker said the 69.4 billion pound-offer failed to reflect the value of its pipeline of experimental medicines.

Royal Mail retreated 8 percent. The U.K. postal service posted full-year pretax profit of 363 million pounds, missing analyst projections that called for 406 million pounds. The company also predicted tougher competition in a parcel-delivery market that contributes more than half of revenue.

Vodafone Drops

Vodafone Group Plc fell 5 percent this week after forecasting that earnings this year will shrink as much as 11 percent amid price wars in its biggest markets and a multibillion-pound spending plan. The company also said it wrote down 6.6 billion pounds on the value of its businesses in its biggest market Germany, as well as Spain, Portugal, the Czech Republic and Romania last year.

Orange SA dropped 3 percent. Societe Generale SA cut its rating on France’s largest phone company to hold from buy, citing increased pressure to cut broadband prices. Any tariff reduction will jeopardize Orange’s 2014 profit target, according to the bank.