European Stocks Rise; BHP Billiton Gains as Commodities Rebound

May 24, 2011, 10:40 AM EDT By Adria Cimino

May 24 (Bloomberg) -- European stocks advanced, with the benchmark Stoxx Europe 600 Index rebounding from a one-month low, as commodities rallied and a report showed that U.S. new- home sales increased more than forecast last month.

BHP Billiton Ltd., the world’s biggest mining company, and Rio Tinto Group, the third largest, both gained at least 2.5 percent as metal prices rose. Travis Perkins Plc climbed 4 percent after Jefferies Group Inc. recommended buying the company’s shares.

The Stoxx 600 rose 0.5 percent to 276.27 at 3:16 p.m. in London. The index fell last week after Greek 10-year bond yields climbed to a record and Fitch Ratings cut Greece’s credit rating to B+, four notches below investment grade. The Stoxx 600 yesterday erased its gains for the year after Spain’s ruling Socialist Party suffered its worst election defeat in 30 years and Standard & Poor’s said it may downgrade Italy’s debt.

“Even if economic growth isn’t as strong, in the long term commodity stocks always tend to go higher,” said Jacques Porta, a Paris-based fund manager at Ofi Patrimoine, who helps oversee about $425 million in stocks. “I’m overweight on them. Everyone is. It’s a story of supply and demand. Emerging markets are big consumers of commodities.”

German business confidence remained unexpectedly unchanged in May as booming exports and rising company spending boosted economic growth. The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, held at 114.2, the same as in April. Economists had forecast a decline to 113.7, the median of 24 predictions in a Bloomberg News survey showed.

U.S. Home Sales

In the U.S., a Commerce Department report showed that purchases of new houses rose in April to the most so far this year. Sales climbed 7.3 percent to a 323,000 annual pace last month. The median estimate in a Bloomberg News survey of economists called for sales at a 300,000 annual rate, unchanged from the prior month. Housing prices rose from a year earlier.

National benchmark indexes gained in 16 of the 18 western European markets. France’s CAC 40 Index climbed 0.5 percent. Germany’s DAX Index and the U.K.’s FTSE 100 Index increased 0.9 percent.

Of the 312 Stoxx 600 companies that have reported earnings since April 11, 58 percent have beaten analysts’ estimates, according to data compiled by Bloomberg.

BHP, Rio, Xstrata

BHP Billiton climbed 2.5 percent to 2,361 pence as copper, lead, zinc and aluminum advanced in London. Rio Tinto increased 2.7 percent to 4,142.5 pence and Xstrata Plc rose 2.8 percent to 1,395 pence. A gauge of basic-resource shares was the best performing of the 19 industry groups in the Stoxx 600. Commodities rebounded from the biggest drop in almost two weeks after Goldman Sachs Group Inc. said it’s turning “more bullish” on raw materials.

Anglo American Plc increased 2.4 percent to 2,897.5 pence. Kazakhmys Plc, a Kazakh copper miner listed in London, gained 3.1 percent to 1,244 pence. Antofagasta Plc, the copper producer controlled by Chile’s Luksic family, jumped 4.1 percent to 1,207 pence.

Travis Perkins jumped 4 percent to 1,041 pence. The shares were initiated with a “buy” rating at Jefferies, which said the stock has 30 percent upside potential.

Arkema SA surged 3.5 percent to 74.31 euros. The stock was raised to “overweight” from “neutral” at HSBC, which said its valuation is the cheapest among European chemical companies.

Mitie, Gas Natural

Mitie Group Plc rallied 5.1 percent to 231.6 pence, its second day of gains, after the company yesterday reported results that showed “an encouraging pick-up in organic growth,” according to a report from UBS AG analyst Alex Hugh, who raised his price estimate on the shares 7.7 percent to 280 pence each. Royal Bank of Scotland Group analyst Kean Marden wrote in a report today that the company’s organic sales growth guidance may be “conservative.”

Gas Natural SDG SA added 1.7 percent to 13.14 euros. The company plans to increase its capital and give Algeria’s national oil company Sonatrach a 10 percent stake as part of a compensation deal, Cinco Dias reported, citing unidentified people close to the matter.

Gas Natural will make an additional payment in cash, settling the remaining money it owes Sonatrach in future price accords for gas supplies, the newspaper said. The Spanish company said it has yet to reach an agreement with Sonatrach.

Greek Privatizations

Greek stocks advanced after the government announced a stepped-up plan to sell holdings in companies including Hellenic Telecommunications Organization SA.

Hellenic Telecom soared 4.2 percent to 6.76 euros. Hellenic Postbank SA surged 5.7 percent to 2.97 euros after the government said it may sell all its 34 percent stake in the lender this year.

Marks & Spencer Group Plc declined 2.4 percent to 387.5 pence. The U.K.’s largest clothing retailer said the outlook for the economy remains challenging as consumers continue to experience a squeeze on their disposable incomes. The company reported fiscal full-year underlying pretax profit of 714.3 million pounds ($1.2 billion). That beat the average analyst estimate of 711 million pounds.

Renewable Energy Corp. slumped 14 percent to 13.13 kroner, its largest drop since February 2010, after the company forecast that it will make a smaller second-quarter operating profit than it did in the first quarter. Renewable Energy also said it will cut its output of wafers, cells and modules in response to current market conditions.

--Editor: Will Hadfield

To contact the reporter on this story: {Adria Cimino} in Paris at acimino1@bloomberg.net

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

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