European stocks advanced in the first week of 2012 as economic reports from around the world added to optimism that the global economy can weather the fallout from the euro area’s sovereign-debt crisis.
Eurasian Natural Resources Corp. and Fiat SpA led gains in mining companies and carmakers, both climbing at least 11 percent. Banks limited gains as UniCredit SpA slumped 38 percent, its largest drop since at least 1989, after announcing that it will hold its planned rights offer at a discount.
The benchmark Stoxx Europe 600 Index rose 1.2 percent to 247.53 in the first five trading days of 2012, for the benchmark measure’s third-consecutive week of gains. The gauge has advanced 5.9 percent since Dec. 16 as U.S. reports from manufacturing activity to durable-goods orders showed the economic recovery is gathering pace.
“The good news is that in the absence of a European meltdown, most of the global economy has been improving,” Russ Koesterich, the San Francisco-based global chief investment strategist at the iShares unit of BlackRock Inc., wrote in a note on Jan. 5. “The most recent measures indicate that growth in the U.S., other developed countries and emerging markets is stabilizing, albeit at a below-trend level.”
Reports in the past week showed that manufacturing in Germany, the U.S., China, India, Australia and the U.K. improved in December. Separate releases showed that private employers added 325,000 workers to payrolls, the biggest increase in records going back to 2001, while Labor Department figures on Jan. 6 showed the U.S. jobless rate dropped to the lowest level since February 2009.
Bank Capital Raising
Concern that European banks will have to raise more capital tempered the Stoxx 600’s weekly advance as Germany kicked off the year’s long-dated sovereign-debt auctions. Germany got bids for 5.14 billion euros ($6.5 billion) of 10-year bunds, while Portugal sold 1 billion euros of three-month bills and France sold 4.02 billion euros of benchmark 10-year bonds. Greece, Italy and Spain will auction their own debt later this month.
National benchmark indexes rose in 13 of the 18 western- European markets. France’s CAC 40 Index lost 0.7 percent, the U.K.’s FTSE 100 Index increased 1.5 percent and Germany’s DAX Index advanced 2.7 percent.
ENRC led a rally in mining companies, surging 11 percent in London trading. The producer of metals in Kazakhstan agreed to acquire First Quantum Minerals Ltd.’s assets in the Democratic Republic of Congo for $1.25 billion, ending a legal dispute between the companies over the Kolwezi copper project.
Mining Companies, Carmakers
Copper producers also advanced. Sweden’s Boliden AB increased 8.9 percent, Kazakhmys Plc gained 7.3 percent and Rio Tinto Group, the world’s third-largest mining company by sales rallied 6 percent.
Carmakers posted the best performance of the 19 industry groups on the Stoxx 600. Research company R.L. Polk & Co. said the number of cars and light trucks sold globally will grow 6.7 percent this year, helped by a 16 percent gain in China.
Fiat, which expanded its controlling stake in Chrysler Group LLC, gained 12 percent. Germany’s Bayerische Motoren Werke AG advanced 7.3 percent, Daimler AG increased 7.5 percent and Volkswagen AG rallied 7.1 percent.
Bank Shares Slide
Banks posted the biggest drop on the Stoxx 600 this week. UniCredit slumped 38 percent to its lowest price since Sept. 1992 after Italy’s largest lender announced a plan to sell its new shares at a 43 percent discount.
The bank’s chief executive officer, Federico Ghizzoni, told Il Sole 24 Ore in an interview that the debt crisis is worsening and expects other banks raising money to do the same.
France’s Societe Generale SA, which announced plans to cut about 10 percent of staff from its corporate and investment bank, fell 9.5 percent, while Deutsche Bank AG, Germany’s largest lender, lost 8.3 percent.
Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA, Spain’s biggest lenders, declined 7.2 percent and 6.8 percent respectively. The Financial Times cited Spain’s Economy Minister Luis de Guindos as saying banks will have to allocate as much as 50 billion euros in further provisions for “troubled” real- estate assets.
Elsewhere, Lagardere SCA gained 2.4 percent after Qatar Holding LLC said it will seek a seat on the media company’s supervisory board and said it may also raise its stake.
Afren Plc soared 24 percent after the oil and gas explorer exceeded its year-end production target.
Adecco SA increased 5.5 percent after agreeing to buy Japan’s VSN Inc. for an enterprise value of 90 million euros, doubling its exposure to professional staffing in Japan.
Among declining shares, Vestas Wind Systems A/S retreated 9.4 percent after the world’s biggest wind-turbine maker cut its revenue and profit forecasts.
Next Plc lost 5.8 percent after the U.K.’s second-largest clothing retailer reported sales for the 21 weeks ended Dec. 24 that missed analyst estimates.