By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stocks rallied on Tuesday, as
investors cheered stronger-than-expected euro-zone retail sales,
while also looking toward central bank meetings later in the weak
with hopes of further monetary easing.
The Stoxx Europe 600 index added 1.6% to 293.41, setting it on
track for the highest closing level since summer 2008.
Shares of outsourcing company Serco Group PLC jumped 7.9%, after
the firm reported a rise in full-year profit and lifted its
dividend. See: Serco year pretax net up; dividend increased.
Deutsche Post AG put on 4.8%, after the German logistics and
mailing company posted higher 2012 profit and said it expected
earnings to rise in 2013. See: Deutsche Post expects higher 2013
earnings.
For the broader European market, investors keyed off gains in
Asia, where bourses rebounded after tighter Chinese property
mortgage rules sent markets lower. Shanghai stocks ended 2.3%
higher. See: Stock gain lifts Dow average to 2nd highest level.
U.S. stocks opened higher on Wall Street, a day after the Dow
Jones Industrial Average settled at the second-highest level
ever.
Euro-zone PMI and retail sales in focus
Investors were also paying close attention to European
purchasing managers' indexes along with retail sales ahead of
Thursday's European Central Bank policy meeting.
The Markit euro-zone PMI composite output index came in at 47.9
in February, above an earlier estimate of 47.3 but below January's
reading of 48.6. See: Euro-zone final Feb. PMI shows deeper
downturn.
Retail sales surprised to the upside, with the January reading
for the euro zone showing a 1.2% improvement, above market
expectations.
Expectations for a rate cut at Thursday's meeting have been
rising in recent weeks, with some analysts seeing Tuesday's data
potentially pressuring the ECB.
"In all, further signs that the downturn in the euro zone is
slowing come as a relief. But with activity remaining very weak,
particularly outside Germany, the ECB will remain under pressure to
implement further support policies this week and beyond," said
Jennifer McKeown, senior European economist at Capital
Economics.
Data from the U.K. showed the services purchasing-managers index
posted the fastest rise in activity for five months, while business
confidence hit a nine-month high. The upbeat data, however, should
be seen in the light of weak manufacturing data released last week,
with pressure remaining on the Bank of England to boost the economy
at its Thursday meeting.
Minutes from the latest meeting showed three out of the nine
members voted for an increase in the bank's asset purchase program,
raising expectations that it would soon act.
"The U.K. services PMI was relief rather than celebration. There
is no doubt that there'll be more [quantitative easing] in the
U.K., maybe this or next month. It's just whether two more guys
approve. I would like to think that they would buy other things
than gilts, maybe loans from the banks to encourage lending," said
Alastair Winter, chief economist at Daniel Stewart Securities.
Movers
Banks posted some of the biggest gains in Europe, with Standard
Chartered PLC rising 2.8% in London, as the bank said it is seeing
good momentum so far this year, after posting an 8% rise in
full-year revenue. See: Standard Chartered: Good '13 start after
flat '12
BNP Paribas SA rose 2.6% in Paris and Banco, Santander SA (SAN)
added 1% in Madrid, while Deutsche Bank AG (DB) put on 2.4% in
Frankfurt.
The U.K.'s FTSE 100 index climbed 1.1% to 6,411.77, with shares
of John Wood Group PLC jumping 7.7% after the energy-services
company said it would boost dividends 26%. See: John Wood year
profit jumps; total payout up 26%
In Germany, shares of BMW AG picked up 2.9%. Chief Executive
Norbert Reithofer said on the sidelines of the Geneva Motor Show
that global sales in January and February rose about 6% to
approximately 250,000 cars, the highest number ever for that
period. See: BMW CEO affirms higher sales target for 2013
Germany's DAX 30 index traded 1.9% higher at 7,834.57.
And in France, shares of Renault SA gained 3.9%. The CAC 40
index gained 1.5% to 3,766.02.
Outside the major indexes, shares of TomTom NV (TMOAY) advanced
1.1%. The Amsterdam producer of navigation equipment said that
Toyota Motor Corp. (TM) would install TomTom's HD Traffic product
as standard equipment on all vehicles with Toyota's Touch & Go
navigation-and-entertainment systems.
Shares of Roche Holding AG added 1.8%, after the drug maker
obtained EU approval for its Perjeta breast cancer drug.
Additionally, the firm said that Chairman Franz B. Humer won't run
for re-election in 2014.
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