European and US stocks end higher

EUROPEAN AND US stocks ended higher yesterday, bolstered by a surprise expansion in US manufacturing and positive stress test results from Spain.

The Dublin market underperformed however, closing flat, despite a lot of money being put to work for the start of the quarter according to one stockbroker.

DUBLIN

DUBLIN’S ISEQ index of Irish shares was flat at 3,279. The Dublin market was dragged down by index heavyweight CRH which ended up down 1.1 per cent according to one Dublin stockbroker.

However, he said there was a lot of money around for airlines, with Aer Lingus and Ryanair ending the day on a positive note, closing up at €1.06 and €4.46 respectively.

“The markets are generally better at the start of the month,” according to the stockbroker who noted there were a lot of buyers for Grafton. The building supplies and DIY group closed up 1.03 per cent at €3.42.

It was also a good day for oil and gas exploration group Providence Resources, which closed up 1.79 per cent at €8.60. Agri-services group Origin Enterprises meanwhile declined, dropping 1.35 per cent to close at €4.30.

LONDON

BRITAIN’S FTSE 100 share index rebounded from three-week lows yesterday, boosted by strong US manufacturing data and prospects of more takeover activity after Xstrata’s board gave long-awaited backing to a bid from Glencore.

Adding to the relatively upbeat investor mood on the first day of the new quarter, Spanish bank stress tests late on Friday revealed no fresh signs of trouble.

Barclays advanced 3.5 per cent to 222.35 pence, rebounding from two-week decline. Liberum upgraded Barclays, Lloyds Banking Group and Royal Bank of Scotland Group to buy, citing bank deleveraging and reduced tail risks. RBS gained 3.7 per cent to 266.4 pence while Lloyds climbed 3 per cent to 39.98 pence.

Xstrata increased 2.4 per cent to 980 pence after the board recommended shareholder’s back Glencore’s takeover offer after gaining assurances on board composition and delinking votes on the bid and bonus payments.

Taylor Wimpey increased 2.6 per cent to 55.7 pence as Citigroup upgraded the homebuilder to buy from neutral and raised its share-price estimate by 31 per cent to 67 pence. A gauge of UK homebuilders rose the most in almost a month, climbing 1.7 per cent, as Citigroup also reiterated its buy recommendation for Bellway, Berkley Group Holdings, Bovis Homes Group and Persimmon.

EUROPE

EUROPEAN STOCKS advanced the most in more than three weeks as test results showed the stress to the Spanish banking system was less than estimated and as US manufacturing expanded for the first time in four months.

Spain commissioned the stress test as part of terms to obtain a European bailout of as much as €100 billion for its banks after more than €180 billion of losses linked to real-estate loans.

Wyman tested the banks’ ability to handle an extreme scenario - a three-year economic contraction - even as the government debated whether to seek a wider rescue package.

Credit Agricole rose 7.4 per cent after starting talks to sell its unprofitable Greek unit. International Consolidated Airlines Group limbed 3.6 per cent after the International Air Transport Association raised its 2012 global airline-profit forecast.

Banco Popular Espanol slumped the most in two months after announcing a capital-increase plan.

The Stoxx Europe 600 Index gained 1.4 per cent to 272.33 at the close in London, the biggest increase since September 6.

The benchmark gauge rallied 6.9 percent in the quarter ended September 30 as the Federal Reserve and European Central Bank started bond-buying programs.

Germany’s DAX gained 1.5 per cent. France’s CAC 40 rose 2.4 per cent.

US

US STOCKS advanced yesterday after a surprise expansion in US manufacturing last month eased concerns about the economy and offset a gloomier outlook in Asia and Europe.

US manufacturing expanded in September for the first time since May as new orders and employment picked up, an Institute for Supply Management report showed. Financial stocks led the market’s advance with Goldman Sachs Group up 4 per cent at $118.28 after the weekly Barron’s said Goldman shares could rise at least 25 per cent in the next year as capital markets improve.

The Dow Jones gained 152.80 points, or 1.14 per cent, to 13,589.93. The SP’s 500 Index rose 14.10 points, or 0.98 per cent, to 1,454.77.

Google rose 0.7 per cent to $760, for a market capitalization of more than $249 billion.

Microsoft, the worlds biggest software maker, fell 0.3 per cent to $29.66, for a valuation of less than $249 billion.