European stocks advanced as earnings reports from Fiat to Apple reassured investors that the global economic recovery is intact amid signs the region is weathering the sovereign debt crisis.
Fiat rallied as the carmaker reported its first profit in three quarters. Rio Tinto Group led a gauge of basic-resource stocks to the best performance among 19 industry groups in the Stoxx Europe 600 Index as Europe's manufacturing and services industries unexpectedly grew. SSL International Plc soared 33 per cent after Reckitt Benckiser Plc agreed to buy the maker of Durex condoms for 2.54 billion pounds ($4.3 billion).
The Stoxx 600 climbed 3.2 per cent to 255.97 this week. The gauge plunged 15 from the this year's high on April 15 through the lowest level reached on May 25 amid concern that governments' attempts to trim their budget deficits will curb economic growth. The measure has since rallied 10 per cent.
``The season has certainly got off to a good start,'' said Piers Hillier, who manages $US12 billion as the chief investment officer of Liverpool Victoria Asset management in London. ``Perhaps unsurprisingly given the macro backdrop, companies have been a little bit more cautious with outlook statements.''
In US, about 85 per cent of companies in the Standard & Poor's 500 Index that have reported results since July 12 beat analysts' per-share earnings forecasts, Bloomberg data show. In Europe, 66 per cent of Stoxx 600 companies have topped estimates, including Fiat and Accor SA.
US economy
The US economy will avoid its second recession in three years, helping global stock markets recover losses in the second half of 2010, according to RCM Asia Pacific Ltd.'s Chief Executive Officer Mark Konyn. This contrasts with Barclays Wealth, which reduced its estimate for this year's gain in European and US stocks because the chance of a slowdown in economic growth has increased. Barclays Wealth manages $US231 billion in client assets.
Rio Tinto, the world's third largest mining company, rallied 11 per cent. BHP Billiton, the biggest, advanced 8.5 per cent. Copper rose every day this week as shrinking inventories signaled an improved outlook for demand.
A composite index based on a survey of euro-area services and manufacturing purchasing managers increased to 56.7 in July from 56 last month, Markit Economics said yesterday. Economists had projected a drop to 55.5, according to a Bloomberg survey. A reading above 50 indicates expansion.
UK growth
The UK economy grew at the fastest pace in four years in the second quarter as rebounding services, manufacturing and construction ignited the recovery, the Office for National Statistics said today. In the US, sales of previously owned homes fell less than forecast last month, according to the National Association of Realtors.
Meanwhile, Federal Reserve Chairman Ben S. Bernanke told the Senate Banking Committee that Fed officials ``recognize that the economic outlook remains unusually uncertain'' while signaling they need to see signs of further weakness before pushing the bounds of monetary policy.
Fiat rallied 6.9 per cent. Second-quarter net income was 90 million euros ($130 million), compared with a 168 million-euro loss a year earlier. Earnings before interest, taxes and one- time gains or losses more than doubled to 651 million euros, beating the 359 million-euro average estimate of analysts compiled by Bloomberg.
Apple posted a 78 per cent surge in third-quarter profit as customers began flocking to the new iPad tablet computer and latest version of the iPhone.
SSL surges
SSL soared 33 per cent to 1,177 pence. Reckitt's offer is worth 1,171 pence a share.
International Power Plc jumped 14 per cent. GDF Suez SA started talks to gain control of the London-based company as France's second-largest utility bids to expand power generation in the Middle East and Asia.
Tomkins rallied 33 per cent. The Canada Pension Plan Investment Board and Onex Corp. said July 19 they are considering a 2.9 billion-pound bid for Tomkins to add businesses spanning car parts and bath tubs.
Cable & Wireless Worldwide Plc slumped 19 per cent, the biggest decline in the Stoxx 600. Full-year profit will be ``around the lower end'' of analysts' estimates following U.K. government spending cuts, the company said July 20.
Bloomberg News
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