April 4 (Bloomberg) -- European stocks rose, sending the Dow Jones Stoxx 600 Index to its biggest weekly gain in a year, as Sanford C. Bernstein & Co. recommended BHP Billiton Ltd. and Rio Tinto Group on the outlook for demand from China.

BHP Billiton, the world's largest mining company, jumped to a four-week high. UBS AG capped its biggest weekly advance since 2001 after former President Luqman Arnold called for a breakup of Europe's biggest bank by assets. British Energy Group Plc surged on a report from La Tribune that Electricite de France SA agreed to make an offer for the company.

European equities pared some of their gains after a U.S. employment report added to concern that the world's largest economy is in a recession. About three stocks gained for every two that fell in the regional gauge.

The Stoxx 600 added 0.4 percent to 319.15, extending this week's increase to 4.1 percent. the biggest since March 2007.

``If you look at the valuations of natural resources, the companies are still cheap,'' said Bob Parker, vice chairman of Credit Suisse Asset Management, which oversees more than $600 billion. Parker was speaking in a Bloomberg Television interview in London.

The Stoxx Basic Resource Index trades at 11.7 times estimated earnings, compared with a four-year average price-to- earnings ratio of 13.2. The index has dropped 1.7 percent this year, the smallest decline among the Stoxx 600's 18 industry groups.

National Indexes

National indexes increased in 15 of the 18 western European markets. The U.K.'s FTSE 100 gained 1 percent, while France's CAC 40 and Germany's DAX rose 0.3 percent.

Europe's Stoxx 50 climbed 0.5 percent as did the Euro Stoxx 50, a measure for the euro zone.

BHP, the world's biggest mining company, gained 3.7 percent to 1,617 pence. Rio Tinto Group, the third-largest, rallied 4.6 percent to 5,694 pence. Sanford C. Bernstein upgraded the stocks to ``outperform'' from ``market-perform'' on expectations that urbanization in China will spur metals demand.

The Stoxx 600 has still lost 12 percent this year as more than $232 billion in losses tied to the collapse of the U.S. subprime market curbs profit growth. Analysts are forecasting earnings will rise 0.6 percent for index members in 2008, down from 11 percent predicted at the end of last year, Bloomberg data show.

Citigroup Forecast

Citigroup Inc. equity strategists slashed their year-end estimate for the Stoxx 600 by 18 percent in a note dated yesterday on concern that earnings in the region will decline as the U.S. economy sinks into a recession.

In December, Citigroup said European stocks might post ``double-digit'' returns in 2008 as central banks cut interest rates to boost economic growth.

``The macro environment in the developed world, and in particular in the U.S., has deteriorated sharply,'' London-based Citigroup strategist Darren Brooks wrote. ``The outlook for corporate earnings also continues to worsen.''

A government report today showed that U.S. payrolls shrank by 80,000 last month, and the jobless rate rose to 5.1 percent, the highest since September 2005. Economists forecast a contraction of 50,000 workers at an unemployment rate of 5 percent in a Bloomberg survey.

The figures ``are bad, but not that bad,'' said Kevin Lilley, a fund manager at Royal London Asset Management, who oversees about $2.5 billion. ``People are becoming immune to some extent. People are positioned for a weakening environment.''

UBS Rallies

UBS, the world's largest money manager, climbed 3.3 percent to 33.46 Swiss francs. Arnold has written to the UBS board suggesting a breakup of the Swiss bank, according to a letter to board member Sergio Marchionne released today.

The bank will review the letter and respond ``in due course and in an appropriate form,'' said Rebeca Garcia, a spokeswoman for UBS.

UBS climbed 15 percent this week after saying that it will replenish capital by raising $15 billion.

British Energy, seeking partners to expand the U.K.'s biggest nuclear power portfolio, rose 7.3 percent to 711 pence, the highest since August 2006. La Tribune reported that Electricite de France SA agreed to make an offer for the company.

Electricite de France has been in contact with all British nuclear companies to discuss participating ``in nuclear renewal,'' spokesman Francois Molho said by telephone today. British Energy spokeswoman Sue Fletcher declined to comment in a telephone interview today on whether the company has held talks with Electricite de France.

To contact the reporters on this story: Sarah Jones in London at sjones35@bloomberg.net; Adam Haigh in London at ahaigh1@bloomberg.net

Last Updated: April 4, 2008 13:01 EDT