European Stocks Rise, Rebounding From Five-Day Decline

Frankfurt (July 11)  European stocks rose, rebounding from a five-day slump, as takeover activity increased and investors bet the financial troubles of Banco Espirito Santo SA won’t spiral into an euro-area banking crisis. U.S. index futures also advanced, while Asian shares fell.

Imperial Tobacco Group Plc gained 2.9 percent after confirming talks with Reynolds American Inc. and Lorillard Inc. to buy some assets and brands. Symrise AG climbed after a report that Japan’s Ajinomoto Co. may be interested in buying the German maker of flavors and fragrances. Indesit Co. added 2.9 percent after Whirlpool Corp. agreed to pay $1 billion for a controlling stake in Italian appliance maker. Banco Espirito Santo dropped 3.9 percent as it resumed trading after a suspension yesterday afternoon and this morning.

The Stoxx Europe 600 Index rose 0.3 percent to 337.27 at 11:49 a.m. in London. The benchmark gauge has lost 3.1 percent this week as investors weigh valuations near the highest level since 2009. Standard & Poor’s 500 Index futures climbed 0.2 percent today, while the MSCI Asia Pacific Index slid 0.3 percent.

“We are looking for a rebound after a sharp selloff in the European markets over the last week,” Ion-Marc Valahu, a co-founder and fund manager at Clairinvest in Geneva, wrote in an e-mail. “Portugal is down over 8 percent in a week on banking fears. The move looks overdone. Banco Espirito Santo appears to be an isolated incident.”

The Stoxx 600 lost 3.6 percent in the past five days and Portugal’s PSI 20 Index plunged to a nine-month low yesterday after the parent of Banco Espirito Santo delayed making payments on some short-term debt. The lender disclosed an exposure of 1.18 billion euros ($1.6 billion) to group companies.

‘Limited Impact’

The Espirito Santo group’s financial troubles are unlikely to have systemic implications for the euro area, Goldman Sachs Group Inc. said in a note. Portuguese bank assets account for only 1.6 percent of the region’s total, foreign banks’ exposure to Portugal is low and the European Central Bank stands ready to support all banks, Goldman said.

Portugal has sufficient bank-recapitalization funds and Espirito Santo is not a threat to the country’s financial system, Barclays Plc analysts led by Antonio Garcia Pascual wrote in a note.

Banco Espirito Santo slid 3.9 percent to 48.9 euro cents. Banca Popolare di Milano Scarl climbed 4 percent to 62 euro cents, leading gains on a gauge of banks that posted the best performance among the 19 industry groups on the Stoxx 600.

Source: Bloomberg