June 29 (Bloomberg) -- European stocks rose, with the Dow Jones Stoxx 600 Index rebounding from its first back-to-back weekly declines since March, as economic confidence in the region climbed to the highest in seven months.

Deutsche Telekom AG advanced 2.5 percent after a person familiar with the situation said Vodafone Group Plc is considering a bid for its U.K. wireless unit. Lloyds Banking Group Plc jumped 6.1 percent as Goldman Sachs Group Inc. added the shares to its “conviction buy” list. Royal Dutch Shell Plc increased 1.8 percent as oil gained.

The Stoxx 600 added 1.7 percent to 208.03 as all 19 industry groups gained. The benchmark index for European equities is heading for the biggest quarterly gain since 1999 on speculation the worst of the first global recession since World War II is over.

“Green shoots are certainly there,” James Bevan, chief investment officer at CCLA Investment Management in London, said in a Bloomberg Television interview. “The market is still in a consolidation phase. I think that represents an excellent long- term buying opportunity.”

European confidence in the economic outlook rose more than economists forecast in June, adding to signs that record low interest rates and stimulus measures are helping to pull the region out of a recession.

An index of executive and consumer sentiment in the 16 nations that use the euro climbed to 73.3, the highest since November, from a revised 70.2 in May, the European Commission in Brussels said today. Economists had forecast an increase to 71 from an initially reported 69.3 in May, according to the median of 24 estimates in a Bloomberg News survey.

Benchmark Indexes

National benchmark indexes advanced in all 18 western European markets, except Luxembourg and Iceland. The U.K.’s FTSE 100 added 1.3 percent and France’s CAC 40 increased 2 percent. Germany’s DAX gained 2.3 percent as Munich Re rallied.

The Stoxx 600 has declined 3.2 percent since June 11 after a three-month rally pushed valuations to 25.4 times earnings, the highest level since 2004.

Deutsche Telekom rose 2.5 percent to 8.44 euros. Vodafone, the world’s largest mobile-phone company, is considering a bid for T-Mobile UK Ltd., the British wireless unit of Deutsche Telekom, said the person, who asked not to be identified because the discussions are private. Vodafone increased 1.2 percent to 117.6 pence.

Lloyds surged 6.1 percent to 70.56 pence. Britain’s biggest mortgage lender was raised to “buy” from “neutral” at Goldman Sachs Group Inc., which said the company will be a “key beneficiary” of higher market share concentration in the U.K.

House Prices

U.K. homes held their value for a second month in June as increased demand and a lack of supply supported residential prices, Hometrack Ltd. said today.

Shell, Europe’s largest oil company, added 1.8 percent to 1,536 pence as crude rallied as much as 3.2 percent to more than $71 a barrel. BP Plc, the second-biggest, climbed 2 percent to 482.75 pence.

Novo Nordisk A/S, the world’s largest insulin maker, climbed 6.9 percent to 288.5 kroner, rebounding from last week’s 5.3 percent drop. The European Association for the Study of Diabetes said its research into the cancer risk from a Sanofi- Aventis SA diabetes drug didn’t include Novo Nordisk’s competing product, Levemir.

Prysmian SpA surged 8.3 percent to 10.60 euros. The world’s second-biggest cable maker said it’s in talks to buy Dutch rival Draka Holding NV to unseat France’s Nexans SA as industry leader. Draka rallied 21 percent to 9.70 euros.

Ferrovial, Holcim

Grupo Ferrovial SA increased 5.2 percent to 23.01 euros. Macquarie Group Ltd. raised its recommendation on the Spanish construction company that owns seven U.K. airports to “outperform,” saying the BBA Ltd. unit “is unlikely to see refinancing risks until 2011.”

Holcim Ltd. rose 3.2 percent to 62.55 Swiss francs. UBS AG added the world’s second-largest cement maker to its “most preferred” list, citing the company’s “exposure to emerging markets and strong financials.”

Munich Re advanced 3.8 percent to 97.05 euros as UBS upgraded the world’s biggest reinsurer to “buy” from “neutral,” citing the “share-price underperformance.”

Admiral Group Plc gained 3.2 percent to 883.5 pence. The U.K. car insurer and broker that owns the confused.com Web site was raised to “outperform” from “neutral” at Credit Suisse Group AG, which said the company “is ideally positioned to take advantage of improving pricing conditions in the U.K. personal motor market.”

To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net

Last Updated: June 29, 2009 12:40 EDT