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MARKET COMMENT: Europe Stocks Rebound as Wall Street Rises

Date : 11/13/2012 @ 11:21PM
Source : Dow Jones News

MARKET COMMENT: Europe Stocks Rebound as Wall Street Rises

European stock markets shook off worries about Greece to stage a late-session rebound on Tuesday, tracking Wall Street higher on the back of signs the U.S. housing market is on the mend.

The Stoxx Europe 600 index rose 0.4% to close at 270.60, breaking a four-session losing streak.

The index spent most of the session in negative territory, however, as investors grew impatient with the lack of a solution for Greece's funding needs.

"The euro-zone crisis is as bubbly as ever. Although Greece passed its austerity budget, the euro-zone finance ministers are finding it difficult to agree on debt relief, which was at the other side of the bargain," said Andrew Milligan, head of global strategy at Standard Life Investments.

"E.ON coming up with an announcement that the trading environment is difficult further highlights growth concerns for the euro zone. Generally this earnings season companies have warned that sales were not as good as hoped," he said.

Shares of E.ON AG plunged 12% in Frankfurt. The utility firm swung to a third-quarter loss as it booked impairment charges on thermal power plants across Europe and lowered its 2013 earnings forecast. In addition, HSBC cut its rating on E.ON to underweight from neutral.

Another conspicuous decliner, shares of Vodafone Group PLC slumped 2.5% in London, after results for the six months to Sept. 30 showed the wireless-telecom carrier swinging to a loss of 1.98 billion pounds ($3.14 billion) from a profit of GBP6.68 billion a year earlier.

Pointing in the opposite direction, shares of Sonova Holding AG jumped 8.5%, as the hearing-aid manufacturer said net income rose 44% in first half of the year.

Investors trained their eyes on Greece, after euro-zone finance ministers delayed releasing the next tranche of the country's bailout money. Jean-Claude Juncker, leader of the ministerial group, said after the meeting in Brussels late Monday that the ministers hoped to reach an agreement at a meeting set for Nov. 20.

In a news conference late Monday, Juncker and International Monetary Fund Managing Director Christine Lagarde disagreed over whether Greece should be given until 2022 to bring its debt level down to 120% of gross domestic product. Lagarde has insisted the IMF wants Greece to stick to its 2020 target.

In addition, the ministers granted Greece two more years--until 2016--to cut its deficit to 2% of GDP.

A draft report from the European Commission, the European Central Bank and the International Monetary Fund noted, however, that such an extension would mean Greece may need an extra 32.6 billion euros ($41.33 billion) in funding, news reports said.

"The most likely outcome of the next two weeks should be a typical euro-zone fudge: lower interest rates on the current Greek loans and an extension of the loans. Imagination or creativity has no limits," analysts at ING said in a note.

On the data front in Europe, Germany's ZEW expectations index unexpectedly fell to minus 15.7 in November from minus 11.5 in October.

Trading action in the U.S., however, helped drag European stock markets out of negative territory in afternoon hours, keying off encouraging trends for the U.S. housing market. The world's largest home-improvement retailer Home Depot Inc. reported a better-than-expected third-quarter result and said it sees a "path toward the healing of the housing market."

U.S. stocks opened lower on Wall Street, but were mostly higher at the European close.

In Europe, shares of risk-sensitive sectors, such as banks rose.

Deutsche Bank AG shares put on 1.9% in Frankfurt, while those of Commerzbank AG gained 0.7%.

Shares of K+S AG slid 4.5% after the salt and fertilizer company narrowed its 2012 outlook to the lower end of its previously forecast range.

Germany's DAX 30 index closed marginally higher at 7,169.12.

In France, shares of Electricite de France SA sank 1.3%, keying off the selling in Germany's E.ON.

Shares of Credit Agricole SA added 3.1% and BNP Paribas SA shares advanced 2.4%.

The CAC 40 index ended the day 0.6% higher at 3,430.60.

On the rise in London, shares of ITV PLC jumped 9%, after the commercial-television network reported a 4% increase in revenue for the nine months to Sept. 30.

Shares of heavyweight bank HSBC Holdings PLC climbed 0.8%, while Barclays PLC shares rose 1%.

The U.K.'s FTSE 100 index gained 0.3% to 5,786.25.

Write to Sara Sjolin at AskNewswires@dowjones.com



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