EUROPE MARKETS: Europe Stocks Rally As German ZEW Index Posts Rise
02/19/2013| 12:08pm US/Eastern
By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets posted broad-based gains on Tuesday, boosted by stronger-than-expected German investor-sentiment data, while shares of Danone SA were among major advancers after a job-cut announcement.
The Stoxx Europe 600 index rallied 1.1% to 290.01, breaking a three-day losing streak.
Stocks extended gains after the Mannheim-based Center for European Economic Research, or ZEW, said its monthly survey of financial professionals produced a rise in its expectations index.
"The only macro-positive reading today was the ZEW survey. My view is that it doesn't reflect the economy because of the way it's constructed, but markets still pay attention to it. It's a further risk-on signal," said James Ashley, senior European economist at RBC Capital Markets.
"Things have improved from where we were three-four months ago, but Europe is still in recession and the U.S. and U.K. are looking fairly lackluster. Q1 will be better than Q4, but that was also a relatively low benchmark," he said.
Ashley said that for markets, much will depend on purchasing-managers' index readings due on Thursday.
"We expect to see a broadly unchanged set of readings, which will be a reality check. Markets are getting ahead of themselves and think the crisis is over, but the path to growth is still challenging," he said.
Among notable movers in Europe, shares of Danone jumped 5.9% after the yogurt maker announced plans to slash around 900 jobs in Europe in response to the region's downturn. The company further said total group sales rose 8% in 2012, beating analysts' expectations. .
Standard Chartered PLC gained 2.4%, as Morgan Stanley lifted the bank to overweight from equal weight.
Shares of Drax Group PLC rallied 6.1% as the electric-utility firm's 2012 results beat expectations.
German ZEW lifts mood
The ZEW economic expectation index jumped 16.7 points to 48.2 in February, exceeding analysts' expectations of a 35.0 print.
February's current economic-conditions indicator, however, dropped slightly to 5.2.
"The fact that the index is now firmly in positive territory means that a large majority of investors see economic conditions improving in the next six months," said Jennifer McKeown, senior European economist at Capital Economics, in a note.
"But there are a few caveats. First, the index has never been well correlated with GDP growth and we will await February's business surveys for stronger evidence of a recovery," she said.
Investors shook off U.S. data showing a gauge of confidence among home builders declined in February, the first weakening since April. The index ticked down to 46 in February from 47 in January. .
U.S. stocks opened higher on Wall Street on the first trading day of the week. U.S. markets were closed Monday for the Presidents Day holiday. .
Back in Europe, Germany's DAX 30 index added 1.6% to 7,752.45, with shares of health-care major Bayer AG up 3.6%. The company said it has initiated trials on the blindness treatment VEGF Trap-Eye with Regeneron Pharmaceuticals Inc. (>> Regeneron Pharmaceuticals Inc).
In France, the CAC 40 index rose 1.9% to 3,735.82. Shares of Carrefour SA gained 4.6% after J.P. Morgan Cazenove initiated coverage of the supermarket retailer with an overweight rating.
Shares of Sanofi SA (>> Sanofi SA) gained 2.6%, as the drug maker said the U.S. Food and Drug Administration has accepted to review an application for the diabetes drug lixisenatide.
The FTSE 100 index advanced 1% to 6,379.07, marking the highest close since January 2008.
Banks pushed higher in London with Barclays PLC (>> Barclays PLC) up 1.5% higher and Royal Bank of Scotland Group PLC (>> Royal Bank of Scotland Group plc) up 1.7%.
Shares of BP PLC (>> BP plc) inched 0.3% higher. The oil giant said it would fight the U.S. government in court next week over claims for fines related to the Deepwater Horizon oil spill.
In a statement, the company said it had always been open to settlements on reasonable terms, but "faced with demands that are excessive and not based on reality or the merits of the case, we are going to trial."
Shares of Vodafone (>> Vodafone Group plc) declined after a broker downgrade, off 2%. Bernstein cut the wireless-telecom firm to underperform from market perform.
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