By Carla Mozee, MarketWatch
LONDON (MarketWatch) -- European stocks leapt Tuesday, logging
their best performance in two months, as shares of BNP Paribas SA
climbed in the wake of the French bank's nearly $9 billion
settlement with U.S. authorities.
Opening the second half of the year, the Stoxx Europe 600 index
rose 0.9% to end at 344.89. It was the strongest percentage gain
since a 1.2% rise on April 29, according to FactSet data.
BNP was a standout, advancing 3.6% after the bank pleaded guilty
to two felony counts on Monday. The plea was part of an $8.8
billion deal to settle an investigation into alleged violations of
U.S. sanctions against Sudan and other countries. The bank is also
banned for a year from conducting certain U.S. dollar
transactions.
BNP shares should "catch up, following the significant
underperformance over the past four months," in part as the bank
will be able to absorb the negative impact from the fine, said J.P.
Morgan Cazenove analysts in a note Tuesday. BNP shares ended the
first half of the year down 10%.
BNP Paribas Chief Financial Officer Lars Machenil said the bank
was in "no rush" to boost its capital cushion, but will consider
opportunities to raise cash.
The gain for BNP shares aided in a 0.9% rise for France's CAC 40 equity index to 4,461.12.
Meanwhile, shares of Banco Monte dei Paschi jumped 8.6%. An
offering of rights to purchase new shares has been closed early
because they sold out on the first day, Dow Jones Newswires
reported Tuesday. The bank on Friday completed a cash call of 4.99
billion euros ($6.83 billion) and funds were being used to repay a
portion of a government loan.
"We firmly believe that the capital increase is the turning
point for the Italian bank," said Peter Garnry, head of equity
strategy at Saxo Bank, in a Tuesday report.
Saxo said financials still dominate its European conviction buy
list despite sharp declines last week of nearly 5% on an
equal-weighted basis.
EU manufacturing slows, but U.K. activity revs up
European equities remained higher after a report showed slowing
in the euro-zone's manufacturing sector in June. Data firm Markit
said its purchasing manufacturers' index was 51.8, lower than a
preliminary reading of 51.9.
But Markit's June manufacturing PMI reading for the U.K. came in
at 57.5, outpacing expectations for a 57.0 reading. The U.K.'s FTSE
100 stock index jumped 0.9% to 6,802.92, and the British pound
(GBPUSD) rose to $1.715 from $1.708 late Monday, trading at levels
last seen in October 2008.
"With U.K. data continuing to exceed expectations the pressure
builds on [Bank of England] to hike rates this year rather than in
2015," wrote BK Asset Management's managing director of FX strategy
Boris Schlossberg. The benchmark interest rate currently stands a
record low level of 0.5%.
Separately, unemployment in Germany in June rose a seasonally
adjusted 9,000 to 2.92 million. The adjusted jobless rate held at
6.7%.
The jobs report together with weak German retail sales results
from Monday indicates the euro-zone's largest economy is starting
to slow down, "although the slack is picked up somewhat by the
periphery, especially Spain, where the rebound continues to gather
pace," Schlossberg wrote.
In Frankfurt, the DAX 30 ended up 0.7% at 9,902.41.
Investors will watch what the European Central Bank will say
about economic growth and monetary policy on Thursday.
Back to stocks, shares of Ocado Group PLC dropped 4.4%. The
British online grocer swung to a pretax profit on a 16% rise in
sales during the first half of the year, but also noted the rate of
growth in the online grocery market is "currently impacted by
subdued and cautious consumer spending."
Mining stocks were among advancers after two separate reports on
manufacturing in China -- a key buyer of natural resources --
suggested a rebound. Anglo American PLC sprung 4% higher,
diversified miner BHP Billiton (BHP) moved up 2.9%, and Rio Tinto
PLC advanced 3%.
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