European Stocks Rise in Broad Rally as Investors Cheer UniCredit

(Bloomberg) -- European stocks advanced, with all but one industry group climbing, as investors endorsed UniCredit SpA’s 13 billion-euro ($13.8 billion) rights offer to put Italy’s biggest bank on a sounder footing.

The Stoxx Europe 600 Index added 1.1 percent, bouncing back from Monday’s 0.5 percent decline -- its biggest loss in two weeks. Investors also are preparing for Wednesday’s Federal Reserve policy decision, in which officials are seen raising interest rates for the first time in a year.

UniCredit helped lead Tuesday’s rally with a 16 percent jump after saying its capital plans also include selling off bad loans and slashing costs in its deepest overhaul to boost capital levels and profitability. The Stoxx 600 Banks Index’s relative strength index climbed above 70, entering into overbought territory.

European Stocks Rise in Broad Rally as Investors Cheer UniCredit
  • Telecommunications and media companies helped the stocks advance to an 11-month high, with the media sector closing at the highest level since October. Silvio Berlusconi’s Mediaset SpA surged the most in two decades after Vivendi SA acquired a 3 percent stake in the commercial broadcaster and said it may buy as much as 20 percent.
  • The Stoxx 600 Banks Index rose 1.2 percent. Even after rallying 47 percent from a July low, it’s still on track for a third consecutive yearly decline.
  • “We see earnings momentum and critically revenue momentum as stabilizing,” UBS strategists led by Nick Nelson wrote in a Tuesday note. “We stick with a slight tilt to cyclicals in our sector strategy, but would refrain from chasing all cyclicals here.”
  • Futures traders are pricing in a 100 percent chance that Fed officials will increase interest rates.