By Barbara Kollmeyer
MADRID (MarketWatch) -- European stocks posted gains on Monday,
with shares of luxury-goods firms LVMH Moet Hennessy Louis Vuitton
and Hermes International both rallying on deal news, while miners
gained in London as gold soared and the dollar fell in the wake of
the weekend Group of 20 meeting.
The Stoxx Europe 600 index advanced 0.4% to 267.71 in afternoon
trading. The index rose 0.4% last week.
Equity markets were bolstered by data showing that U.S.
existing-home-sales increased 10% in September to a seasonally
adjusted annual rate of 4.53 million. The rise was bigger than
economists expected.
Earlier in the session, the European Union statistics agency
reported that euro-zone industrial orders rose 5.3% in August on a
monthly basis.
Some gains for markets were being credited to the weekend G-20
meeting of finance ministers and central bankers in South Korea.
The meeting offered no solutions to currency wars, but a joint
communique warned of the need to shift toward currency rates that
are more determined by markets.
"The key result of the G-20 meeting at the weekend was that
there has been an agreement to prevent the competitive devaluation
of currencies," said Richard Perry, chief market strategist at
Central Markets. "This has ushered the dollar bears back to the
table today."
Lack of a concrete goal for dollar weakness pushed that currency
to a 15-year low against the Japanese yen, boosting metals shares
in London. See related story on dollar's hitting a 15-year low.
"A weak dollar has spurred on the return of the risk trade, with
the metals commodities the clear beneficiaries," Perry said in
emailed comments. "Mining stocks across the board are having a
strong run today."
He said these gains also leave the way open for the FTSE 100 to
test April resistance at 5,834. The FTSE rose 0.6% to 5,774.51.
Copper miner Antofagasta PLC rose 3.6%, Kazakhmys PLC added 3.8%
and Xstrata PLC gained 3%.
Luxury deal lifts CAC-40
Another big story in Europe centered on French luxury-goods
makers, with shares of Hermes International rallying 13.3%.
Over the weekend, LVMH Moet Hennessy Louis Vuitton SA said it
now holds 14.2% of the share capital of Hermes. LVMH also holds
derivative instruments over some Hermes shares and intends to
request conversion. Once that process is complete, LVMH will hold
17.1% of Hermes's capital.
LVMH said it aims to be a long-term shareholder of Hermes and
doesn't intend to launch a tender offer or seek control.
Shares of LVMH rose 3.4% in Paris, where the French CAC-40 index
gained 0.4% to 3,882.22.
Deutsche Bank analysts raised their rating on LVMH to buy from
hold, saying the deal "clarifies LVMH's strategic direction."
"We now believe the near-term risk of value-destructive M&A
action has receded," the analysts said in a note. "This enables us
to re-focus on the fundamentals of one of the most attractive and
defensive plays in the luxury sector."
Deutsche Bank also said lofty gains for Hermes shares are
unlikely to last. The shares are up more than 114% this year.
Deal news gave the rest of the luxury-goods sector a boost, with
shares of Compagnie Financiere Richemont SA up 2.6% in Switzerland
and Bulgari SpA up 3.1% in Italy. In London, Burberry Group PLC
rose 3.4%.
Also up in Paris, shares of auto maker Renault SA rose 2.4%.
Renault is scheduled to report third-quarter sales Wednesday.
Volkswagen drives the DAX
Sticking with cars, in Germany, shares of automotive giant
Volkswagen AG rallied 6% after the group released earnings ahead of
schedule Friday. Volkswagen tripled its year-to-date profit, citing
strong demand for passenger cars, but urged caution over the fourth
quarter. See more on Volkswagen's early results.
Analysts at Societe Generale described the results as
"stunning," saying the numbers had blown away forecasts, just as in
the second quarter. In a research note, they said they would expect
"significant upgrades" to consensus estimates in coming days, with
some heavy lifting of price targets foreseen as well. They rate
Volkswagen shares a buy.
But at Santander, analysts were cautious, saying they will stick
to their hold rating. "A re-rating of the stock would require
sustained improvement in the European passenger-car market and an
acceleration in the Porsche synergies," they said in a note.
Gains for Volkswagen helped drive the DAX 30 index up 0.7% to
6,650.78.
In Sweden, shares of truck maker Scania AB fell 4.9%. The group
reported third-quarter net profit of 2.31 billion Swedish kronor
($352 million), a large jump from profit of 278 million kronor in
the same period a year ago. Sales totaled 18.56 billion kronor,
falling short of expectations.
In the financial sector, shares of Lloyds Banking Group PLC
(LYG) fell 3.8%. Analysts at Credit Suisse cut their 12-month
target price on the bank to 79 pence from 87 pence, saying several
issues may drive down the shares in the near term, including the
potential impact of falling property prices.
Shares of Standard Chartered PLC fell 1.4% and Royal Bank of
Scotland Group PLC (RBS) dropped 1.3%.
Meanwhile, media group Pearson PLC fell 1.3% after it said
demand in some of its markets remains subdued. The company also
said it's trading ahead of previous guidance and now expects
full-year adjusted earnings per share to increase 10% compared with
a year earlier.