Europe ends week on positive note

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European equity indices ended the week on a positive note, bouncing back from a four-day losing streak after stronger-than-forecast US employment data helped support an improving mood.

But the FTSE Eurofirst 300, which rose 1.3 per cent to 962.42 during trading on Friday, lost 1.6 per cent over the week as pressure on financial and resource stocks took some momentum from its recent rally.

Caution through the early part of the week hit higher-risk financial and resource stocks as investors explored the possibility that sustained gains made since March had taken markets too far, too fast.

While the wider banking sector followed the general pattern on equities indices, Commerzbank stood out, making consistent gains. Shares in the German bank were 7.1 per cent higher at €6.98 over the week after Martin Blessing, chief executive, told the Financial Times that the group could return to profit next year.

The brighter outlook for European banks helped KBC, the Belgian company that received three state bail-outs, rise 8.2 per cent on Friday to €28.25, after gains of almost 10 per cent over the previous session.

Carmakers also had a mixed week, reversing earlier losses on Friday. Peugeot rose 7.3 per cent to €20.02 after it reached an agreement with Mitsubishi Motors Corp to begin producing and selling an electric car based on a model designed by the Japanese company.

Renault, which fell sharply on Tuesday gained 5.1 per cent to €30.27 on Friday. BMW also enjoyed a better end to the week, up 5.2 per cent to €31.73. But Volkswagen, whose share price has been sliced in half since the beginning of August as details about its proposed merger with Porsche emerged, fell 1.4 per cent to €120.87, putting it among the bigger fallers on the day.

German utilities came under heavy pressure after a downgrade by Goldman Sachs on Eon, the country’s largest energy company. Eon shares were 3.8 per cent down to €28.72 over the week.

Insurance stocks fell on concerns that the industry will need to raise fresh equity from investors under proposed new European rules. Swiss Re, the world’s second-largest reinsurer, fell 8.2 per cent to SFr45.22 over the week and Germany’s Allianz lost 5.5 per cent to €76.98.

German chipmaker Infineon was boosted by speculation that it was planning to increase its core profit margin target in the fourth quarter to 10 per cent. Its shares rose 5.82 per cent to €3.73, continuing its recovery from its March low, when it fell to €0.34.

France’s Alcatel-Lucent lost 8 per cent over the week after the telecoms group announced plans to refinance its debt by issuing up to €1bn of convertible bonds.

European equities markets continued to rise on Friday after US employment data showed a lower number of job losses than forecast in August, helping support a tentative return to risk.

Resource stocks also made headway amid signs of a revived appetite for risk ahead of the US non-farm payroll report, which was expected to show a continuing decline in the pace of jobs lost within the world’s biggest economy.

The FTSE Eurofirst 300 reversed a four-day losing streak, rising 1 per cent to 960.80. Germany’s Xetra Dax also climbed 1.6 per cent to 5,384.43, while France’s CAC 40 rose 1.3 per cent to 3,598.76.

Banks were among the top gainers. Germany’s Commerzbank was 4.7 per cent higher at €6.97. Its chief executive, Martin Blessing, told the Financial Times earlier in the week that the group could return to profit next year.

KBC, the Belgian bank that received three state bail-outs, rose 8.2 per cent to €28.25, after gains of almost 10 per cent over the previous session. Spain’s Banco Santander climbed 4.5 per cent to €10.77, while Deutsche Bank was up 3.5 per cent at €48.50. Dexia, the Franco-Belgian financial services group, was 1 per cent higher at €5.76 after UBS raised its price target to €7.60 from €7.0.

Société Générale, however, bucked the positive trend, losing 0.1 per cent to €52.20 amid dealing-room rumour of a potential capital raising at the French bank.

Miners performed well thanks to higher metals prices, with zinc jumping 5 per cent to a 13-month high. Gold has gained about 5 per cent in two days to trade close to $1,000 an ounce, while copper rose 0.6 per cent and aluminium was up 0.5 per cent.

Eurasian Natural Resources, the London-listed Kazakhstan miner that is a main supplier of steel ingredients to Russia and China, was up 3.6 per cent at 825p. Peter Hambro Mining, a large gold producer, rose 2.2 per cent to 828.62p. Xstrata, the Swiss miner, climbed 2 per cent to 832.73p.

Carmakers also fared well. Peugeot rose 7.3 per cent to €20.02 after Japan’s Mitsubishi Motors said on Friday that it had reached an agreement with the French company for a tie-up in electric vehicles. They will jointly develop and introduce electric cars to market by the end of 2010.

French carmaker Renault, which lost €2.7bn ($3.8bn) in the first half of 2009 as its revenues slumped by more than one fifth, was up 5 per cent at €30.27.

At the other end of the market, defensive stocks were under pressure.

Elan, the Irish pharmaceuticals company, dropped to €5.15 after suffering a sharp setback in its recapitalisation plans on Thursday when a US judge ruled that a planned $1.5bn deal with Johnson & Johnson violated the terms of an existing partnership with Biogen Idec.

DelHaize Group, the Belgian supermarket group was down 0.6 per cent at €47.19, while Carrefour, the world’s second-biggest retailer, slipped 1.2 per cent to €31.03.

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