European Stocks Climb for Ninth Day as China Lets Yuan Gain

LONDON, Jun. 21 -- European stocks rose for a ninth day, extending the longest rally in 11 months, after China's signal that it will relax the yuan's fixed rate to the dollar stoked confidence in the global economy.

BHP Billiton Ltd. and Rio Tinto Group surged to the highest levels since April on speculation a stronger yuan will boost Chinese demand for metals. Akzo Nobel NV gained 2.1 percent after agreeing to sell its National Starch unit to Corn Products International Inc. Acergy SA and Subsea 7 Inc. jumped more than 9 percent after agreeing to combine their businesses.

The Stoxx Europe 600 Index climbed 1.1 percent to 258.18, the highest close in seven weeks. The measure has advanced 11 percent from its 2010 low on May 25 as concern eased that Europe's debt crisis will derail the economic recovery.

"The central bank of China's announcement is good for sentiment and the market is gaining renewed optimism from this," said Raimund Saxinger, a Frankfurt-based fund manager at Frankfurt Trust Investment GmbH, which oversees about $22 billion. "The real impact will be small though and the positive effect might be short-lived as the announcement was expected."

National benchmark indexes rose in all 18 western European markets. Germany's DAX gained 1.2 percent and France's CAC 40 increased 1.3 percent. The U.K's FTSE 100 climbed 0.9 percent.

Yuan Flexibility

The People's Bank of China said on June 19 it will allow greater currency flexibility, signaling an end to the yuan's two-year-old peg to the dollar. The decision was made after the world's third-largest economy improved, the central bank said, without indicating a timeframe for the change. It ruled out a one-time revaluation, saying there is no basis for "large-scale appreciation," and kept the yuan's 0.5 percent daily trading band unchanged.

"The move appears to reflect increased confidence that the Chinese and world economies are growing in a stable and sustainable fashion," UBS AG strategists including Bhanu Baweja and George Bory wrote in a report today. "Almost certainly, China's leadership would not have taken this step unless they were confident about economic and financial stability."

A measure of basic-resource producers in the Stoxx 600 soared as much as 4.7 percent as copper, lead, nickel, tin and zinc rose on the London Metal Exchange.

BHP Billiton, the world's largest mining company, jumped 4.7 percent to 2,031.5 pence, the highest close since April 29. Rio Tinto, the third-biggest, surged 5 percent to 3,490 pence. Vedanta Resources Plc surged to the highest level in more than a month, adding 6 percent to 2,471 pence.

Swatch Soars

Swatch Group AG, the watchmaker that generates about 28 percent of its revenue in China, climbed 5.4 percent to 337.8 Swiss francs.

Daimler AG and Bayerische Motoren Werke AG surged 3.2 percent to 44.50 euros and 2.7 percent to 41.80 euros, respectively. China is among the luxury carmakers' biggest individual markets.

Porsche SE advanced 5.5 percent to 37 euros. Matthias Mueller, the automaker's chief product strategist, is the frontrunner to succeed Chief Executive Officer Michael Macht, according to two people familiar with the matter. The move would be part of a bigger reshuffle in which Macht would become the VW group's production head.

Separately, Commerzbank AG lifted its recommendation on the carmaker to "hold" from "reduce", saying "while it is risky, we believe upside potential matches downside risk at current share price levels."

Akzo Nobel climbed 2.1 percent to 46 euros after the world's biggest maker of paints agreed to sell its National Starch business for $1.3 billion in cash.

Acergy, Subsea 7

Acergy surged 9.6 percent to 110.3 kroner after the U.K. provider of oil services agreed to buy Subsea 7 for about 15.8 billion kroner ($2.5 billion) in shares to create a "global leader" in seabed engineering and construction. Subsea 7 rallied 9.1 percent to 113.3 kroner.

Aegon NV rose 3.1 percent to 5.10 euros. The owner of U.S. insurer Transamerica Corp. is preparing to sell its British life and pension insurance business, including Scottish Equitable, for 1.5 billion pounds ($2.2 billion), the Mail on Sunday reported, without saying where it got the information.

TNT NV jumped 2.8 percent to 22.62 euros as Het Financieele Dagblad said CVC Capital Partners Ltd. is in talks to buy part of the postal unit of Europe's second-biggest express-delivery company. The newspaper cited unidentified people familiar with the matter.

BASF, HeidelbergCement

BASF SE advanced 1.5 percent to 46.90 euros. The world's biggest chemical maker is poised to announce the purchase of Cognis GmbH for at least 3.1 billion euros ($3.9 billion) as soon as tomorrow, according to two people with knowledge of the discussions.

HeidelbergCement AG rose 2.4 percent to 46.20 euros. The world's third-largest cement maker said it aims to revive profit with spending reductions and by adding plants in emerging markets such as India, Indonesia and Bangladesh.

A.P. Moeller-Maersk A/S gained 3.1 percent to 52,500 kroner, the highest close since September 2008. Maersk Lines has set itself a target of delivering cargo by deadline 95 percent of the time after finding that could raise revenue as much as 17 percent, Copenhagen-based Maersk said in its company newsletter Maersk Post.

Solarworld AG jumped 8.5 percent to 10.75 euros as Deutsche Bank AG upgraded its recommendation on the German solar company to "buy" from "hold." Mediaset SpA, Italy's biggest private television broadcaster, climbed 2.8 percent to 5.09 euros as Citigroup Inc. recommended buying the shares.

BP Slips

BP Plc limited gains in European shares, sliding 2.2 percent to 349.5 pence. The Sunday Times said the company is seeking to raise $50 billion to cover the cost of the oil spill in the Gulf of Mexico.

BP may first raise $10 billion from a bond sale this week and is talking to banks to get a $20 billion loan, the newspaper reported, without saying where it got the information. The remaining $20 billion would come from asset sales over two years, the newspaper said. BP wants to move quickly to raise cash because of concern its ratings may be downgraded, boosting its borrowing costs, the newspaper said.

"We need to have an unusually strong cash position," Andrew Gowers, head of communications of London-based BP, said when contacted by phone. He declined to provide more details.