Europe Stocks Advance on Optimism About U.S. Budget Deal

Bloomberg: European (SXXP) stocks gained for a fourth day, extending an 18-month high, amid optimism U.S. lawmakers will agree a budget, and before the European Central Bank unveils 2014 forecasts. U.S. futures fell. Asian stocks rose.

Daimler AG (DAI) gained 0.5 percent after saying it will sell half its remaining holding in European Aeronautic, Defence & Space Co. Deutsche Bank AG (DBK) lost 1.4 percent as a report said that three former employees claimed the lender hid losses during the financial crisis. GDF Suez SA slid 12 percent after saying earnings will decline next year.

The Stoxx Europe 600 Index rose 0.3 percent to 277.65 at 8:05 a.m. in London, the highest in 18 months. The gauge has surged 19 percent from this year’s low on June 4 as the ECB and the Federal Reserve boosted economic support and optimism rose that U.S. lawmakers will avoid the so-called fiscal cliff. Standard & Poor’s 500 Index futures slipped 0.2 percent today, while the MSCI Asia Pacific Index added 0.2 percent.

A few dozen Republicans joined a bipartisan call to break the impasse between President Barack Obama and House Speaker John Boehner over taxes for the highest-earning Americans, signing a letter calling for exploration of “all options.” Obama told a business group in Washington that lawmakers probably could solve the budget debate in about a week if Republicans move.

ECB Forecasts

ECB President Mario Draghi will announce the latest economic forecasts, including the first outlook for 2014, at a press conference scheduled for 2:30 p.m. in Frankfurt. Economists projected the central bank will keep its benchmark interest rate unchanged at a record low of 0.75 percent, in a decision due 45 minutes before the press conference.

Separately, another survey of economists projected the Bank of England will also keep its interest rate unchanged in an announcement due at noon in London.

Daimler advanced 0.5 percent to 38.39 euros after saying in a statement it will sell a 7.5 percent-stake in EADS, valued at 1.66 billion euros ($2.17 billion). The automaker will sell more of its remaining 7.5 percent stake after a lock-up period of 180 days from the end of the sale of the first tranche.

EADS jumped 6 percent to 28.86 euros. The company’s corporate restructuring will remove the 10 percent “government discount” on the share value, Bank of America wrote in a note, raising its recommendation on the stock to buy from neutral.

Deutsche Bank

Deutsche Bank retreated 1.4 percent to 34.48 euros. Three former employees told U.S. regulators that the German lender covered up paper losses of as much as $12 billion during the financial crisis, the Financial Times reported, citing people it didn’t identify. The lender disputed the allegation.

GDF Suez (GSZ) slipped 12 percent to 15.11 euros after Europe’s largest utility by market value said in a statement late yesterday that recurring net income will be 3.1 billion euros to 3.5 billion euros next year, compared with an expected 3.7 billion euros to 4.2 billion euros in 2012.

Bank of America Corp.’s Merrill Lynch unit lowered its recommendation on the shares to neutral from buy.

Hargreaves Lansdown Plc (HL/) slid 0.7 percent to 738.5 pence after Morgan Stanley lowered its recommendation on the shares to equalweight, the equivalent of hold, from overweight.

reporter on this story: Namitha Jagadeesh in London