European Stocks Rise Most Since June on Rate-Cut Speculation

Dec. 1 (Bloomberg) -- European stocks had their biggest weekly gain since June on speculation the Federal Reserve will lower interest rates to prevent credit-market losses from dragging the world's biggest economy into a recession.

``The situation is serious enough to expect further rate cuts,'' said Guenther Gerstenberger, a fund manager at Oberursel, Germany-based PEH Wertpapier AG, which oversees the equivalent of $5.5 billion. ``In the medium term we'll see strong equity markets.''

Commodity stocks rose the most in 10 weeks, led by BHP Billiton Ltd., Anglo American Plc and Rio Tinto Group. Barclays Plc and Commerzbank AG paced an advance of financial stocks after strategic buyers from emerging-market countries bought stakes in Citigroup Inc., the biggest U.S. bank, and Fortis of Belgium.

The Dow Jones Stoxx 600 Index added 3.5 percent to 370.36 this week. Still, the gauge dropped 4.7 percent in November for the worst monthly performance since May 2006 as concern mounted that credit-market turmoil may damp economic and profit growth.

Federal Reserve Chairman Ben S. Bernanke said Nov. 29 policy makers must decide whether ``renewed turbulence'' in financial markets has shifted the risks between growth and inflation, signaling the Fed's concern that credit-market losses may be expanding into the broader economy.

The remarks stoked investors' expectations for the Fed to lower interest rates on Dec. 11. Fed funds futures on the Chicago Board of Trade show traders see a 100 percent chance of a reduction in the benchmark rate next month.

Swedish Decline

On Nov. 26, the Standard & Poor's 500 Index extended its drop to 10.1 percent from its Oct. 9 record. A fall of 10 percent for a benchmark is commonly considered a ``correction.''

National benchmarks gained in all 18 western European markets this week. Germany's DAX Index advanced 3.4 percent. France's CAC 40 added 2.7 percent, as did the U.K.'s FTSE 100. The Stoxx 50 increased 3.4 percent, and the Euro Stoxx 50, a measure for the euro region, rose 3 percent.

The OMX Stockholm 30 Index increased 4.5 percent in the last three trading days. As of the close on Nov. 27, the index had lost 19.3 percent from its seven-year high reached on July 16. A loss of 20 percent is considered the beginning of a bear market.

The Dow Jones Stoxx Basic Resource Index climbed 7.3 percent this week, the most since September, as prices for copper, tin and lead increased, and amid renewed takeover speculation.

As of the close of European equity markets, copper gained 4.6 percent in the past five trading days, rising to more than $7,000 a metric ton and heading for the biggest weekly gain since September.

Mining Companies

``As long as there are no signs of a slowdown in the emerging markets, commodity stocks are attractive,'' said Carsten Klude, who helps manage $20 billion as head of investment strategies at M.M. Warburg & Co. in Hamburg.

BHP Billiton gained 2.5 percent. Rio Tinto added 6.1 percent. Anglo American rose 10 percent.

BHP, under pressure from investors to increase its unsolicited $128 billion offer for Rio Tinto Group, said Nov. 28 competitors couldn't match the proposal and it wouldn't speculate on making a higher bid.

Vedanta Resources Plc jumped 13 percent on speculation India's largest copper and zinc producer will receive a takeover bid. The company's London-based spokesman Robin Walker said Nov. 29 the company isn't talking ``with any parties.''

Bank shares rebounded from a two-year low after Abu Dhabi's government said it will buy as much as 4.9 percent in Citigroup Inc., the biggest U.S. bank, and China's second-biggest insurance company bought a stake in Belgium's Fortis.

`Value'

``Long-term investors are starting to see value in the financial industry,'' said Sergi Martin Amoros, who helps oversee $5.3 billion at Credit Andorra SA in Andorra. ``Bad news is still to come, but we will see plenty of opportunities. We are close to an end of this nightmare.''

Barclays jumped 10 percent. The U.K.'s third-biggest bank said Nov. 27 pretax profit in 2007 will be ``broadly in line'' with analysts' average estimate of about 7.1 billion pounds ($15 billion). The bank didn't provide guidance for 2008.

Commerzbank, Germany's second-largest lender, advanced 14 percent.

Fortis increased 7.3 percent. Ping An Insurance (Group) Co. bought a 4.2 percent stake in Belgium's biggest financial- services company for 1.81 billion euros ($2.7 billion) in the largest overseas acquisition by a Chinese insurer.

Northern Rock Plc advanced 37 percent after billionaire Richard Branson's Virgin Group Ltd. won British government support to buy the mortgage lender bailed out two months ago by the Bank of England.

Porsche

``There is much more to go in this subprime issue,'' said Sailesh Bhundia, who helps manage $2.4 billion at EFG Asset Management in London. ``I don't think financial stocks will be able to lead the broader market higher, they need time to restore their balance sheets.''

Anglo Irish Bank Plc rose 27 percent. Ireland's third- largest bank posted a 52 percent gain in full-year profit to 998 million euros as business and property lending increased at home and the company expanded in the U.K. and U.S.

Porsche SE jumped 9.5 percent. The maker of the 911 sports car said Nov. 28 four-month sales gained 15 percent on demand for an upgraded Cayenne sport-utility vehicle and that it's ``carefully optimistic'' about full-year performance.

Vedior NV soared 45 percent, the steepest gain in the Stoxx 600 this week. The second-biggest Dutch provider of temporary employment received an indicative takeover proposal from Randstad Holding NV, the world's third-largest staffing company.

The two Dutch companies are holding talks that may lead to a public offer by Randstad, Amsterdam-based Vedior said.

Signet Group Plc plummeted 20 percent, the steepest drop in the Stoxx 600. The world's largest jewelry store owner reported a 69 percent decrease in third-quarter profit and said it's unlikely to meet analysts' full-year estimates because of a slump in U.S. sales.