European Stocks Rise; ICAP, Hochtief, Royal Dutch Shell Gain

Dec. 14 (Bloomberg) -- European stocks advanced after yesterday's drop, the biggest in three weeks, left shares in the region near their cheapest in at least five years.

ICAP Plc, the world's largest broker of transactions between banks, and Hochtief AG, Germany's biggest builder, gained. Erste Bank AG climbed after Lehman Brothers Holdings Inc. recommended buying shares in Austria's largest bank. Royal Dutch Shell Plc led oil producers higher as crude rose in New York.

The Dow Jones Stoxx 600 Index added 0.4 percent to 367.15 at 10:10 a.m. in London, limiting the retreat this week to 1.6 percent. Stocks sank the most since Nov. 21 yesterday on concern a plan by central banks to ease the credit squeeze won't be enough to prevent an economic slowdown.

``Valuations are attractive,'' said Philippe Gijsels, senior equity strategist at Fortis Global Markets which manages $62 billion in Brussels. ``It's maybe a good idea to look at some banks that have already come clean and have moved toward a solution.''

The Stoxx 600 is valued at 12.66 times profit, the lowest since at least January 2002, weekly data compiled by Bloomberg show.

The risk of European companies defaulting on their debt fell, according to traders of credit-default swaps. U.S. Treasuries were little changed today before a government report that economists said will show consumer prices are increasing at the fastest pace in six months.

The Standard & Poor's 500 Index added 0.1 percent yesterday, while the Dow Jones Industrial Average gained 0.3 percent.

National benchmarks increased in 12 of the 18 western European markets. France's CAC 40 gained 0.3 percent, while Germany's DAX added 0.5 percent. The U.K.'s FTSE 100 also climbed 0.5 percent.

Stoxx 50

The Stoxx 50 increased 0.3 percent, as did the Euro Stoxx 50, a measure for the euro region.

ICAP advanced 2.2 percent to 697 pence. Hochtief climbed 2.4 percent to 91.15 euros.

Freddie Mac, the second-biggest U.S. mortgage finance company, has raised enough capital to ride out credit losses next year as tighter underwriting and higher guarantee fees increase profit, Bear Stearns Cos. analysts said.

The Wall Street Journal reported today that Goldman Sachs Group Inc. may post record full-year profit of more than $11 billion on Dec. 18, boosted by $4 billion from bets on subprime mortgage-related lending. The Journal cited analysts in the forecast.

Citigroup Inc. shares gained in Europe after the company said it will take over seven troubled investment funds and assume $58 billion of debt to avoid forced asset sales that would further erode confidence in capital markets.

``There are individual and group initiatives,'' said Jean- Paul Pierret, a strategist at Dexia Securities in Paris. ``They all converge for the beginnings of better transparency'' in the credit-market turmoil

Erste Bank

Erste Bank advanced 2.5 percent to 48 euros. Lehman Brothers initiated coverage with an ``overweight'' recommendation and a price estimate of 66 euros.

``With signs of a global slowdown looming, we would argue the Austrian banks are well positioned as they offer structurally driven growth,'' the analysts wrote in a note. They started coverage of Austrian banks with a ``positive'' view.

Shell, Europe's largest oil company by market value, added 1.1 percent to 2,015 pence. OMV AG, the Austrian oil company that wants to acquire Hungarian rival Mol Nyrt., rose 1.7 percent to 50.60 euros. Galp Energia SGPS SA, Portugal's biggest oil company, jumped 6.9 percent to 16.49 euros.

Crude oil rose to near $93 a barrel in New York. The contract for January settlement climbed as much as 67 cents, or 0.7 percent, to $92.92 a barrel on the New York Mercantile Exchange.

Chemical Makers

Ciba Specialty Chemicals AG led chemical makers higher after Citigroup Global Markets said Dow Chemical Co. may buy a company in the industry. Ciba advanced 3 percent to 54.95 francs. Umicore gained 1.6 percent to 155 euros.

Dow Chemical, which will get $9.5 billion from selling 50 percent of its commodity-plastics unit to Kuwait, may use the cash to buy a specialty-chemical maker as big as Celanese Corp. of the U.S., Citigroup Global Markets said. Switzerland's Ciba and Brussels-based Umicore also fit Dow's acquisition criteria, the analysts said.

Ubisoft SA surged 7.4 percent to 63.76 euros. Europe's second-largest maker of video games raised its revenue and profit margin forecasts, citing record sales of the ``Assassin's Creed'' game.

United Business Media Plc rose 2.9 percent to 596 pence. The company said second-half revenue will increase 6 percent to 7 percent, helped by ``strong'' sales at the U.K. company's PR Newswire unit and its exhibition services.

Inspicio Plc rallied 11 percent to 219.5 pence after 3i Group Plc, Europe's second-biggest publicly traded private equity firm, agreed to buy the U.K.'s biggest food tester in a bid that values that values the company at 228.6 million pounds ($467 million). 3i rose 0.7 percent to 1,016 pence.

Continental AG fell 1.3 percent to 88.80 euros. Europe's second-largest tiremaker was given an ``underweight'' recommendation as Morgan Stanley restarted coverage.