Alternative energy groups fuel European advance

By Rachel Morarjee

Published: November 4 2008 10:58 | Last updated: November 4 2008 19:21

Alternative energy stocks were in the vanguard of a rally that saw European markets make gains for the sixth consecutive session on Tuesday.

The sector, which is a key barometer for risk appetite, posted dramatic double-digit gains as investors snapped up the stocks, which had more than halved in value since touching their highs in October last year.

Hopes for a Democratic victory in the US election, which could usher in a more favourable subsidy regime, provided another boost, analysts said.

German chemicals group Wacker Chemie, which produces polysilicon for solar panels, reported a forecast-beating 21 per cent increase in third quarter net profit, boosting the solar sector as renewable energy stocks tracked the wider market higher.

Norwegian solar company Renewable Energy rocketed 21.9 per cent to NKr85.60 while Germany’s largest solar company Q-Cells surged 15.8 per cent to €40.72. In the wind sector Denmark’s Vestas flew up 15.6 per cent to DKr311 while Spain’s Gamesagained 15.8 per cent to €15.28.

In the wider market, shares shrugged off some poor results, as investors hunted for bargains among stocks which lagged before last week’s dramatic rally.

Life insurers led the advance in the financial sector, while oil and commodities stocks also posted robust gains, propelling the FTSE Eurofirst 300 up 4.3 per cent to 974.15. The index has now risen 24 per cent since its low point on October 27.

In Frankfurt Germany’s Xetra Dax jumped 5 per cent to 5,278.04, while in France the CAC 40 rose 4.6 per cent to 3,691.09, following Wall Street’s charge higher as Americans voted for their next president.

Across the Atlantic, hopes for rate cuts in theUS and UK underpinned gains after similar cuts in Australia and emerging markets, said Mike Lenhoff, strategist at Brewin Dolphin.

“There is a like-minded urgency with which central banks are now prepared to respond to the threat of recession. That has provided a much more encouraging tone for markets,” he said.

Double-digit gains pushed life insurers higher with Swiss Life surging 20.1 per cent to SFr133.20 while Dutch ING group rose 19.5 per cent to €9.09 as concerns about solvency in the sector receded, dealers said.

Swiss Re, one of the world’s biggest reinsurance companies, reversed early losses after posting third-quarter losses of SFr304m to end up 11.2 per cent at SFr56.45.

Banks put in a strong showing with UBS up 4 per cent to SFr19.70 despite the Swiss bank warning that it may make a loss in the fourth quarter. Rival Credit Suisse gained 1.2 per cent to SFr43.38, while France’s Société Générale charged ahead 11.2 per cent to €47.05.

German luxury carmaker BMW shrugged off worse-than-expected third quarter results, with net profit down by 63 per cent. Its shares rose 11.6 per cent to €22.97, following the company’s announcement that it would cut back production, after dipping in early trade.

The carmaker said its fall in revenues reflected “the noticeable reluctance of customers to spend in the face of the crisis on international financial markets”, and warned it would not be able to meet its 2008 profit targets.

Other car companies drove forward, recouping some of Monday’s losses with France’s Renault up 9.7 per cent to €25.65, Peugeot advancing 6 per cent to €22.15 and Germany’s Volkswagen, which has been volatile, edged up 1.3 per cent to €398 despite its weighting in the Dax index dropping below 10 per cent.

Copyright The Financial Times Limited 2008