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European Stocks Gain on Backing for Greece


European stocks climbed for a third day as assurance from Germany and France that Greece will remain a member of the euro outweighed a $2 billion trading loss at UBS AG. Asian shares gained and U.S. futures fluctuated.

Kingfisher Plc gained 5.1 percent after Europe’s largest home-improvement retailer posted earnings that topped analyst estimates. UBS tumbled 5.6 percent after Switzerland’s biggest bank reported a trading loss of about $2 billion because of unauthorized deals at its investment bank.

The benchmark Stoxx Europe 600 Index advanced 0.9 percent to 226.24 at 8:38 a.m. in London, extending yesterday’s 1.5 percent gain. The gauge has still fallen 22 percent from this year’s peak on Feb. 17 as European and U.S. economic reports trailed forecasts, adding to concern that the global economic recovery is at risk.

“Germany and France affirmed their commitment to keep Greece within the euro,” said Zahid Mahmood, a senior trader at London Capital Group. “Given we are not seeing much more than rhetoric at the moment, many people still expect Greece to default and see the move up as nothing more than a relief rally.”

The MSCI Asia Pacific Index increased 1.1 percent today. Standard & Poor’s 500 Index futures rose less than 0.1 percent after the benchmark gauge for U.S. equities jumped 1.4 percent yesterday.

Greek Assurances

French President Nicolas Sarkozy and German Chancellor Angela Merkel said late yesterday they are “convinced” Greece will stay in the euro area as they faced international calls to step up efforts to fight the region’s debt crisis.

The leaders of the euro region’s two biggest economies issued the statement following a phone conversation with Greek Prime Minister George Papandreou. Papandreou committed to meet deficit-reduction targets demanded as a condition for an international bailout, according to statements from governments in Athens, Berlin and Paris.

The benchmark Stoxx 600 rallied for a second day yesterday amid speculation China may still buy euro-area government bonds even after Premier Wen Jiabao said indebted countries must not rely on bailouts.

China is willing to buy bonds from countries involved in the sovereign debt crisis “within its capacity,” Zhang Xiaoqiang, a vice chairman of the National Development and Reform Commission, said at the World Economic Forum in the Chinese city of Dalian today. The NDRC is China’s top economic planning agency.

 

Italy Austerity

In Italy, Prime Minister Silvio Berlusconi won final parliamentary approval for a 54 billion-euro ($74 billion) austerity package that seeks to balance the budget by 2013 in an attempt to stem the nation’s surging borrowing costs.

Kingfisher gained 5.1 percent to 251.8 pence after the retailer reported a 24 percent increase in first-half adjusted pretax profit to 439 million pounds ($692 million). That beat the average analyst estimate of 408 million pounds.

UBS dropped 5.8 percent to 10.30 Swiss francs

“UBS has discovered a loss due to unauthorized trading by a trader in its investment bank,” the company said in a statement. “The matter is still being investigated, but UBS’s current estimate of the loss on the trades is in the range of $2 billion.”

Hennes & Mauritz AB advanced 6.2 percent to 196.20 kronor after the clothing retailer reported an 8 percent gain in total sales for August.

ArcelorMittal rose 2 percent to 13.14 euros after Citigroup Inc. raised its recommendation for the world’s largest steelmaker to “buy” from “hold.”

Associated British Foods Plc advanced 2.5 percent to 1,093 pence. The company, which this week said second-half earnings will meet its expectations, was upgraded by UBS AG to “buy” from “neutral.”

Source: Bloomberg