European stocks were higher midday on Tuesday as automobile shares rallied after a better than expected reading for an economic sentiment indicator in Germany, the continent’s largest economy and a major car manufacturer.
European stocks were higher midday on Tuesday as automobile shares rallied after a better than expected reading for an economic sentiment indicator in Germany, the continent’s largest economy and a major car manufacturer.
“There’s strong buying interest in Daimler,” one Frankfurt-based trader said, referring to the German maker of Mercedes-Benz cars, whose shares were up 3.3 percent.
Shares in French carmaker Peugeot rose 3 percent after WestLB upgraded its recommendation on the stock to “add” from “hold”, saying its recent weakness was overdone. German truckmaker MAN rallied 4 percent.
The DJ Stoxx European autos index was up 2.9 percent, topping the sectoral leaderboard, having fallen 9 percent between Feb. 4 and Feb. 11.
Firm prices of precious and base metals prices underpinned mining companies’ shares, and higher oil prices lifted energy stocks.
By 1230 GMT, the FTSEurofirst 300 index of leading European shares was up 1.1 percent at 1,305.27 points, helped by U.S. stock index futures, which turned positive after trading in the red earlier in the day.
German investor morale improved in February for the first time since May 2007, suggesting the pivotal euro zone country may weather the turbulence buffeting financial markets and bounce back later this year.
The Mannheim-based ZEW research institute’s economic sentiment indicator, based on a survey of 314 analysts and institutional investors, rose to minus 39.5 from minus 41.6 in January, bucking market expectations for a fall.
Insurance and banking shares, Monday’s leading losers, recouped most of their morning losses, with traders attributing the recovery to comments from Dutch banking and insurance group ING that it was “aware of its obligations to report any material deviations” when asked about market talk of large writedowns that had the stock down more than 6 percent.
ING’s shares recovered to stand down 1.1 percent.
Shares in Credit Suisse eased 0.6 percent after the Swiss bank scaled back its full-year 2007 subprime writedowns but also reported a 49 percent fall in fourth-quarter profit. Subprime write-downs in the fourth quarter were 1.26 billion francs, Credit Suisse said.
“These write-downs are towards the higher end of expectations, and importantly, there is still significant residual risk left on balance sheet,” Goldman Sachs analysts said in a research note.
AIG CASTS SHADOW
Sentiment towards financial sector stocks took a hit on Monday as auditors of American International Group, the world’s largest insurer, said the company failed to account properly for derivatives related to risky debt known as collateralised debt obligations (CDOs).
“The read-across to European insurance from AIG’s travails is limited to Swiss Re,” Fox-Pitt Kelton said in a research note.
“Swiss Re is the only European insurer known to have written comparable CDS (credit default swap) protection on subprime-related underlying assets, and its current notional exposure of around $1 billion is less than 5 percent of AIG’s net notional,” Fox-Pitt, Kelton said.
Given that its exposure is widely appreciated and of a considerably lower magnitude, this should not be a significant cause of concern,” it added.
Swiss Re shares fell 1.2 percent.
Higher metals prices boosted mining shares, with BHP Billiton up 3 percent, Rio Tinto advancing 2.9 percent, and Anglo American rising 2.3 percent.
But Xstrata fell 1.5 percent after the Financial Times reported that the Anglo-Swiss miner had rejected a cash-and-shares takeover approach from Brazil’s Vale pitched at just under 40 pounds a share, or 39 billion pounds ($76 billion).
Among energy shares, Italy’s ENI advanced 2.7 percent, French Total rose 2.1 percent, and Royal Dutch Shell was up 1.8 percent, as crude oil held near $93 a barrel.
JPMorgan reiterated its “overweight” rating on ENI, saying the shares looked cheap and traded at a discount to rivals, despite offering the sector’s highest dividend yield.
Norway’s Renewable Energy Corporation (REC) rose 10.7 percent after the solar industry group reported a bigger-than-expected rise in fourth-quarter core profit.
“Today’s rise goes some way towards regaining ground lost when the company warned on Feb. 6 that its expansion in polysilicon production capacity is running over budget and behind schedule,” Killik & Co said in a note. (Reuters)(Additional reporting by Eva Kuehnen in Frankfurt and Sitaraman Shankar in London, editing by Will Waterman)
