By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stocks rallied to their highest
level in 41/2 years Tuesday, as investors cheered
stronger-than-expected euro-zone retail sales and keyed off gains
in U.S. equities, where the Dow Jones Industrial Average moved into
record high territory.
The Stoxx Europe 600 index added 1.8% to 294.11, marking its
highest closing level since June 2008.
The jump came as U.S. markets rallied, after the ISM services
gauge jumped to the highest level in a year. See: U.S. stocks rally
to lift Dow to new heights
Both European and U.S. stock markets have since New Years
drifted higher, after U.S. politicians averted the immediate
so-called fiscal cliff of tax hikes and spending cuts.
Additionally, ultra-loose monetary policy through massive liquidity
injections from central banks have boosted equity markets to close
to pre-crisis levels.
On Tuesday, investors keyed also 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.
Banks were among top movers in Europe among with companies
posting strong earnings. Shares of outsourcing company Serco Group
PLC jumped 8.9%, 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 5.8%, 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.
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 of 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
Among notable gainers in Europe, Standard Chartered PLC rose
3.2% in London after the bank said it is seeing good momentum so
far this year. It posted an 8% rise in full-year revenue. See:
Standard Chartered: Good '13 start after flat '12
Other banks were also higher, with BNP Paribas SA rising 2.9% in
Paris and Banco Santander SA (SAN) adding 1.9% in Madrid, while
Deutsche Bank AG (DB) put on 3.3% in Frankfurt.
The U.K.'s FTSE 100 index climbed 1.4% to 6,431.95, settling at
its highest level sine January 2008. See: Serco Group rallies in
upbeat U.K. market
Shares of John Wood Group PLC jumped 7.9% 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 closed 2.3% higher at 7,870.31.
And in France, shares oil major Total SA (TOT) added 2.2%, as
oil prices moved higher. See: Crude-oil prices rebound from 2013
low
The CAC 40 index gained 2.1% to 3,787.19.
Outside the major indexes, shares of Roche Holding AG added
1.4%, 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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