European stocks rise on ECB hopes

Fri, Aug 17, 2012, 01:00

European stocks advanced to almost a five-month high amid optimism policy makers will take steps to protect the region's banks and as investors awaited reports on American consumer confidence and leading economic indicators.

US index futures were little changed, while Asian shares rose.

Bankia SA jumped 6.6 per cent on speculation the Spanish lender will shortly receive bailout funds.

Swiss Life Holding, Switzerland's biggest life insurer, gained 3.9 per cent after reporting first-half earnings that beat estimates.

Lonmin slumped to its lowest since December 2008 as a violent labour strike at its South African mine fuelled concern the company may breach its debt covenants.

The Stoxx 600 climbed 0.3 per cent to 271.93 at 10.24 am in London, the highest since March 20.

The benchmark gauge is heading for a 0.8 per cent increase this week as German Chancellor Angela Merkel supported a European Central Bank plan to resolve the debt crisis.

September contracts on the Standard and Poor's 500 Index fell less than 0.1 per cent, while the MSCI Asia Pacific Index added 0.3 per cent.

"The Merkel comments have helped the market," said Pierre Mouton, a fund manager who helps oversee $6 billion at Notz Stucki and Cie in Geneva.

"There will be good news to come from Europe. The market was extremely pessimistic, especially on banks. Europe's commitment on lending to banks shows that the region won't let them fail."

The Stoxx 600 is poised for its 11th successive weekly gain, the longest winning streak since January 2006.

The current rally started with Greece forming a government after a second national election and continued as central banks increased stimulus measures and ECB president Mario Draghi pledged to preserve the euro at any cost.

German chancellor Angela Merkel, speaking in Canada yesterday, backed the ECB's insistence on conditions for helping to reduce borrowing costs in indebted countries, saying Germany is "in line" with the central bank's approach to defend the euro.

Meanwhile, shares in Kerry Group outpaced all its global peers in the past two months, allowing it to overtake low-cost airline Ryanair as the largest company with a main listing on the Irish Stock Exchange.

Kerry rose 7.4 per cent over two days to a record €39 on August 10 after raising earnings guidance, giving the company a market value of €6.85 billion.