European Banks Send Shares Higher on Stimulus Bets

By Jonathan Morgan

European stocks extended a two-month high as lenders rallied on speculation the European Central Bank will step up stimulus. U.S. index futures and Asian shares rose.
The Stoxx Europe 600 Index added 0.3 percent to 346.17 at 11:34 a.m. in London, with the gauge’s lenders contributing the most to the advance. The benchmark index gained 2.9 percent last week as Mario Draghi said the ECB needs to accelerate inflation and may broaden its asset-purchase program, while China cut key interest rates for the first time since 2012.
“Banks are outperforming on the prospect of economic stimulus measures,” said Guillermo Hernandez Sampere, who helps manage about 130 million euros ($161 million) at MPPM EK in Eppstein, Germany. “This is a good sign for their
earnings, which suffered in the low interest rate environment.”
Banks in the Stoxx 600 rose 1.3 percent as a group. Banco Santander SA added 2.5 percent and Societe Generale SA gained 3.6 percent. Spain’s IBEX 35 Index and France’s CAC 40 Index climbed more than 0.9 percent, the biggest increases among 18 western-European markets.
As stocks advanced, the yield on 10-year Spanish government bonds fell below 2 percent for the first time on speculation the ECB will buy sovereign debt.
“The status quo is to invest with the belief that stimulus will continue to be supportive to equity prices,” Daniel Weston, a portfolio manager at Aimed Capital GmbH in Munich, wrote in an e-mail. “All corners of the world are stimulating. Investors are being forced to consider separating weak fundamentals with bullish stimulus.”

German Confidence

Stocks extended gains after a report showed German business confidence rose in November for the first time in seven months. The Ifo institute’s business climate index, based on a survey of 7,000 executives, climbed to 104.7 from 103.2 in October. Economists had forecast a drop to 103. The DAX Index (DAX) increased 0.7 percent, heading for its highest close since July.
Automakers added 1.4 percent as a group. Peugeot SA gained 3.7 percent and Bayerische Motoren Werke AG added 1.7 percent.
Some shares moved on mergers-and-acquisitions activity. Friends Life Group Ltd. rallied 4.6 percent after Aviva Plc said it’s in talks to buy the company. Aviva, Britain’s second-biggest insurer, declined 5.1 percent.
BT Group Plc climbed 2.8 percent after the biggest U.K. broadband provider said it’s in early talks with two mobile companies about an acquisition.

Stock Upgrades

Among other stocks that moved, London Stock Exchange Group Plc (LSE) advanced 3.1 percent and Deutsche Boerse AG gained 1.2 percent after Citigroup Inc. recommended buying shares of the bourse operators. Raiffeisen Bank International AG rose 2.3 percent after ING Groep NV raised its stock rating to buy from hold, and Metro AG increased 4.1 percent after a Macquarie Group Ltd. upgrade.
Petrofac Ltd. (PFC) tumbled 24 percent after saying annual profit will be on the low end of its forecast range. FirstGroup Plc slumped 7.9 percent after report that the U.K. rail and bus operator will miss out on the London-Scotland East Coast Main Line train contract likely to be awarded this week.
The Stoxx 600 climbed 11.4 percent from its low in October through the end of last week, sending its valuation to the highest level since December 2009. The gauge traded at 15.8 times estimated profit, data compiled by Bloomberg show.
Standard & Poor’s 500 Index futures expiring in December rose 0.2 percent today, while the MSCI Asia Pacific Index advanced 0.4 percent.