MARKET COMMENT: Europe Stocks Rebound as Wall Street Rises
November 13 2012 - 12:51PM
Dow Jones News
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