European Stocks Advance; Intesa Sanpaolo Leads Rally in Banks

May 25, 2011, 12:39 PM EDT By Julie Cruz

May 25 (Bloomberg) -- European stocks climbed the most in two weeks as concern eased that the region’s debt crisis will spread after Jean-Claude Juncker said an assessment on new measures for Greece may come as soon as next week.

Banks had the best performance among 19 industry groups in the Stoxx Europe 600 Index, with Intesa Sanpaolo SpA rising 5.1 percent. EON AG and RWE AG, Germany’s biggest utilities, advanced after the Financial Times Deutschland reported the government may scrap a tax on nuclear reactors. Cable & Wireless Communications Plc plunged 12 percent after saying it’s cautious on the outlook for its Caribbean operations.

The Stoxx 600 gained 0.7 percent to 277.37 at the 4:30 p.m. close in London, reversing earlier declines of as much as 0.6 percent. The gauge has risen 5.8 percent from this year’s low on March 16 amid optimism company profits and government stimulus measures will keep the economic recovery on track.

“Greece is still a concern but Juncker saying that by mid- next week a decision will have been made regarding how Greece will be helped is supporting the market,” said Markus Huber, head of German sales trading at ETX Capital in London. “What the market needs is to hear what actions will be taken by the ECB and the IMF in order to avoid a default by Greece. The earlier this happens the less likely will be a contagion to other countries.”

Greek Assistance

Juncker, who heads the group of euro-area finance ministers, said he is strongly against a full restructuring of Greece’s debt. Euro-region countries may take further steps to help Greece with its debt crisis if the country meets all requests by the 17-member currency zone, he told reporters in The Hague. A final assessment on new measures for Greece may come as early as next week, he said.

A report today showed U.S. orders for durable goods fell more than forecast in April, reflecting lower demand for aircraft and disruptions in supplies of auto parts stemming from the earthquake in Japan. Bookings for goods meant to last at least three years fell 3.6 percent, the most since October, after a 4.4 percent jump in March, Commerce Department data showed. Economists projected a 2.5 percent drop in April, according to the median forecast in a Bloomberg News survey.

National benchmark indexes advanced in 15 of the 18 western European markets today. Germany’s DAX and France’s CAC 40 rose 0.3 percent. The U.K.’s FTSE 100 gained 0.2 percent.

Banks Advance

European banking shares rose 2.1 percent as a group, led by gains in Italian lenders. Intesa Sanpaolo jumped 5.1 percent to 1.76 euros and Banca Popolare di Milano Scrl surged 3.9 percent to 1.94 euros. UniCredit SpA, Italy’s biggest bank, rose 2.7 percent to 1.57 euros.

Italian banks are well positioned to pass European Union’s stress tests, Prometeia said. The country’s lenders hold portfolios that are less risky than their counterparts in France and Germany, the research group said at a presentation in Milan.

Commerzbank AG, Germany’s second-largest bank, rallied 6.1 percent to 3.21 euros, the biggest increase in a year. All 13 German lenders examined in the second round of EU stress tests are likely to pass after boosting and converting capital and shifting risky assets into bad banks, three people familiar with the process said.

EON, RWE

EON and RWE gained 2.3 percent to 20.12 euros and 1.9 percent to 41.49 euros, respectively. German reactor operators could reach an informal deal with the government in which the tax is dropped in exchange for the utilities accepting shorter running times for nuclear plants and not pursuing legal challenges to atomic energy policy, the FTD reported, citing unidentified people close to the government and ruling coalition.

Cable & Wireless Communications plunged 12 percent to 42.41 pence, the lowest since July 2006. The U.K. telecommunications company said “we are cautious on the economic and financial outlook for the Caribbean.”

Hexagon AB, the world’s biggest maker of measuring instruments, sank 4 percent to 154.60 kronor, the biggest retreat in six months, as Chairman Melker Schorling and Chief Executive Officer Ola Rollen sold 11.7 million shares.

Vallourec SA, a French producer of steel pipes, slid 1.6 percent to 83.60 euros as Societe Generale SA downgraded the shares to “hold” from “buy.”

--Editor: Andrew Rummer

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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