Tuesday, October 6, 2009

European, Asian Stocks Climb; Raw-Material Shares, Banks Gain

. Tuesday, October 6, 2009

By stockOzone team

European and Asian stocks gained as higher commodities lifted metal producers, while financial shares advanced after BofA Merrill Lynch Global Research recommended European banks.

BHP Billiton Ltd., the world’s biggest mining company, climbed for a second day in London as copper increased. Societe Generale SA, France’s second-largest bank by market value, fluctuated after saying it aims to raise 4.8 billion euros ($7.1 billion) and is in talks to purchase Dexia SA’s 20 percent stake in Credit du Nord. Dexia added 2.2 percent.

The Dow Jones Stoxx 600 Index gained 0.4 percent to 237.11 at 8:19 a.m. in London, while futures on the Standard & Poor’s 500 Index rose 0.2 percent. The benchmark gauges for Europe and the U.S. rebounded yesterday as a report showed American service industries returned to growth after 11 months of contraction.

Stocks had dropped for two weeks as data on U.S. unemployment, manufacturing and consumer confidence missed economists’ forecasts, fueling concern that the global economic recovery may not be robust.

The MSCI Asia Pacific Index advanced for the first time in four days today, adding 1.2 percent. Shares in Australia pared earlier gains as the country’s central bank unexpectedly raised its benchmark interest rate from a 49-year low and signaled further increases in coming months.

BHP added 1.5 percent to 1,683 pence, while Rio Tinto Group, the world’s third-biggest mining company, gained 2.6 percent to 2,631.5. Copper, lead, nickel and tin advanced on the London Metal Exchange.

Societe Generale, Dexia
Societe Generale gained as much as 2.3 percent to 53.41 euros and lost as much as 2.3 percent. The lender said it will repay 3.4 billion euros to the government with its rights offer. Shareholders can buy two new shares for every nine held at 36 euros each, or 31 percent less than yesterday’s closing price.

The French bank is also in discussions to buy Dexia’s stake in Credit du Nord, a French retail bank it controls, and aims to conclude the talks by the end of the year. Dexia gained 2.2 percent to 6.07 euros.

Steps identified so far by Societe Generale will have a positive impact on gross operating profit of 430 million euros in 2009 and 1 billion euros in 2010, the bank said. Societe Generale said that it will pay out between 35 percent and 40 percent of net income as dividends.

European banks were raised to “overweight” at BofA Merrill Lynch Global Research, which said “with further EPS upgrades ahead reasonable valuations offer the potential for re- rating.”

Adidas, Tesco
The European luxury-goods industry was upgraded to “neutral” from “bearish” at Nomura Holdings Inc., which said “although the decline in luxury sales has been particularly pronounced and sudden, trends appear to be stabilizing.”

The brokerage lifted Adidas AG to “buy” from “reduce.” Adidas, the world’s second-largest sporting-goods maker, added 2.4 percent to 35.89 euros.

Tesco slipped 1.1 percent to 387 pence. The world’s third- biggest retailer said first-half net profit was 1.03 billion pounds ($1.64 billion), compared with analysts’ estimates for profit on that basis of 1.04 billion pounds.

Alcoa Inc. kicks off the U.S. third-quarter earnings season tomorrow, while companies including Banco Espanol de Credito SA report in Europe this week.

Nobel Prize-winning economist Joseph Stiglitz said U.S. unemployment will keep rising and should be the focus for policy makers, and gains in the stock market show investors have been “irrationally exuberant” about a recovery.

“There’s a lot of risk going ahead of some big bumps,” he said yesterday in a Bloomberg Television interview from Istanbul, citing housing, commercial real estate and consumers’ inability to pay off credit cards because of job losses. “There’s a very big risk that markets have been irrationally exuberant.”

Disclosure: Author does not own any of the stocks discussed here.





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