By Adria Cimino
Oct. 8 (Bloomberg) -- European stocks advanced for a second week as central banks eased lending, investors speculated that policy makers will act to support the region?s debt crisis and U.S. jobs data spurred optimism the world?s largest economy will avoid a recession.
Antofagasta Plc, Rio Tinto Group and Eni SpA led gains in commodity shares as base metals and oil climbed. Axa SA, Europe?s second-biggest insurer, rallied 11 percent after reiterating its earnings target. Dexia SA sank 42 percent as Belgium?s biggest bank headed toward a breakup. National Bank of Greece SA slid the most since August.
The Stoxx Europe 600 Index advanced 2.6 percent to 231.99 this past week as the Bank of England expanded its bond-purchase program and German Chancellor Angela Merkel said she?s ready to discuss recapitalizing lenders. The gauge has still retreated 20 percent since this year?s high on Feb. 17 and is trading at 9.8 times its companies? estimated earnings, near the cheapest since March 2009, according to data compiled by Bloomberg.
?The fact that governments have acknowledged that banks need to be recapitalized is a relief,? said Arnaud Scarpaci, a fund manager at Agilis Gestion SA in Paris, which oversees about $110 million. ?This week?s employment numbers were good news for the market. A lot of investors were betting on a recession and now they have to realize that won?t happen.?
BOE Bond Purchases
The Bank of England said on Oct. 6 that it will boost bond purchases as government budget cuts and Europe?s debt crisis jeopardize Britain?s economic recovery. The Monetary Policy Committee raised the ceiling for so-called quantitative easing to 275 billion pounds ($423 billion) from 200 billion pounds.
The European Central Bank announced the reintroduction of yearlong loans, giving banks access to unlimited cash through January 2013. It will also resume purchases of covered bonds to encourage lending. At the same time, the European Commission is pushing for a coordinated capital injection into lenders and Merkel said policy makers ?shouldn?t hesitate? if it turns out financial institutions are undercapitalized.
The European Union will discuss bank capital at its summit on Oct. 17-18, with finance ministers left to carry out the implementation, Merkel said yesterday after talks with Dutch Prime Minister Mark Rutte. Using the enhanced European rescue fund to support banks should only be permitted as a measure of last resort, she said.
?Solving the European debt crisis is all about Germany,? said Morten Kongshaug, chief equity strategist at Danske Bank A/S in Copenhagen. ?If they want to solve this they can do it.?
U.S. Economy
U.S. employers added more jobs than forecast in September, payroll gains were revised up in the prior two months and hours and earnings increased, helping ease concerns the U.S. labor market is deteriorating. Payrolls climbed by 103,000 workers after a revised 57,000 increase in August that was more than originally estimated, Labor Department data showed yesterday.
National benchmark indexes gained in 14 of Europe?s 18 western markets. France?s CAC 40 rallied 3.8 percent, the U.K.?s FTSE 100 rose 3.4 percent and Germany?s DAX increased 3.2 percent. Greece?s ASE slid 6.8 percent.
Antofagasta, the copper producer controlled by Chile?s Luksic family, soared 15 percent, the most since February 2009. Rio Tinto, the world?s second-biggest mining company, climbed 9.5 percent. A gauge of basic-resources shares rallied 6.8 percent, the largest gain in 11 months and the biggest increase among the 19 industry groups in the Stoxx 600.
Commodities Climb
The Standard & Poor?s GSCI Spot Index of 24 commodities surged 2.1 percent this week as of 5:28 p.m. in London, rebounding from four weeks of losses. Copper climbed 3.9 percent for its best weekly performance in three months.
Eni, Italy?s biggest oil company, advanced 10 percent. Repsol YPF SA, Spain?s largest oil driller, added 8.8 percent. Total SA, Europe?s third-largest oil company, climbed 6.3 percent. Crude oil for November delivery gained 3.9 percent this week on the New York Mercantile Exchange.
Axa jumped 11 percent. The insurer still expects 10 percent annual growth in operating earnings per share through 2015, the company said Oct. 5 in a presentation on its website.
Dexia sank 42 percent, the biggest weekly drop on record, before shares were suspended on Oct. 6. The bank inched toward a breakup as France, Belgium and Luxembourg sought to protect their local units from the debt crisis. The stock declined on concern that the breakup will leave shareholders with little of value, while S&P downgraded the credit ratings of three units, citing the group?s limited access to wholesale funding markets. Trading in the shares is due to resume on Oct. 10.
Greek Banks Slide
Greek banks fell after policy makers signaled they may renegotiate the terms of the nation?s bailout. Euro-area finance ministers meeting on Oct. 3 considered ?technical revisions? to the second Greek support package, Luxembourg Prime Minister Jean-Claude Juncker said. National Bank of Greece, the country?s largest lender, retreated 21 percent and Piraeus Bank SA declined 19 percent.
Bank of Ireland surged 22 percent, the biggest jump since January 2010. Ireland aims to be the first of three bailed-out euro-area countries to exit their rescue program, Irish Prime Minister Enda Kenny said. The government wants to sell debt in 2012 and wants to be in the market ?as soon as possible,? he said in a Bloomberg Television interview in Dublin yesterday.
SABMiller Plc advanced 5.5 percent after Brazilian news website IG reported that the world?s second-biggest brewer is in talks to be bought by larger competitor Anheuser-Busch InBev NV. Nigel Fairbrass, a spokesman for London-based SABMiller, and Marianne Amssoms, a spokeswoman for Leuven, Belgium-based AB InBev, declined to comment on the report.
AB InBev shares dropped 2.4 percent.
--With assistance from Peter Levring in Copenhagen. Editors: Andrew Rummer, Srinivasan Sivabalan
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
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