May 31 (Bloomberg) -- European stocks rallied, sending the Dow Jones Stoxx 600 Index to the highest since September 2000, after E.ON AG said it will buy back $9.4 billion in shares and Belgian billionaire Albert Frere bought a stake in Iberdrola SA.

E.ON and Iberdrola led utility shares to a record. Scottish & Southern Energy Plc rose after earnings beat analysts' estimates. ASML Holding NV climbed the most in six weeks on plans to pay cash to shareholders. BHP Billiton Ltd. paced a rebound in mining stocks as copper advanced and the company named a new chief executive officer.

``The good fundamentals for equities still remain as we have seen a good reporting season and mergers and acquisitions are still quite positive,'' said James Buckley, a London-based director at Baring Asset Management, which oversees about $37 billion.

Vallourec SA, a maker of steel tubes used to carry oil, had its biggest jump in almost six weeks after the Daily Mail said there is speculation that OAO Gazprom may bid for the French company.

About two-thirds of companies in the Stoxx 50 that have reported earnings or sales have topped estimates, according to data compiled by Bloomberg.

The Stoxx 600 added 0.8 percent to 396.74. The Stoxx 50 increased 0.5 percent and the Euro Stoxx 50, a measure for the 13 nations sharing the euro, gained 1 percent.

Indexes extended gains after the National Association of Purchasing Management-Chicago business barometer rose to 61.7 in May from 52.9 the previous month, suggesting the U.S. economy is accelerating after bottoming in the first quarter.

Business Confidence

National benchmarks climbed in all 18 western European markets. Germany's DAX advanced 1.5 percent. France's CAC 40 gained 1 percent, and the U.K.'s FTSE 100 climbed 0.3 percent.

European business and consumer confidence unexpectedly rose this month to the highest level in almost six years, according to the European Commission. An index of sentiment among executives and consumers in the euro region advanced to 111.9 from 110 in April. Economists had expected the index to remain unchanged.

Asian markets advanced to a record today after minutes from the U.S. Federal Reserve indicated growth in the world's largest economy will accelerate.

``Any positive news or comments on U.S. growth is broadly welcomed by global markets,'' said Baring's Buckley.

Shares of E.ON rallied 4.1 percent to 122.18 euros. Europe's biggest power company yesterday said it will buy back 7 billion euros ($9.4 billion) in stock less than two months after abandoning a takeover bid for Spain's Endesa SA.

E.ON

E.ON plans to invest 60 billion euros by 2010 to expand business and achieve ``targeted growth'' in Europe and neighboring regions. The steps will raise generating capacity by about 50 percent by the end of the decade, the company said.

Iberdrola rallied 2 percent to 42.9 euros after Belgian's Albert Frere said he had bought a 5 percent stake of Spain's second-largest power company.

Frere's investment companies said late yesterday they paid 2.2 billion euros for the stake. Frere, 81, is already the largest investor in Suez SA, Belgium's largest utility, and Total SA, Europe's largest refinery.

Vallourec

Vallourec increased 13.38 euros, or 6 percent, to 237.85. There is speculation Gazprom, the world's biggest gas company, may bid 300 euros a share for Vallourec, the Daily Mail newspaper reported today, without saying where it got the information.

Gazprom spokesman Sergei Kupriyanov didn't answer his mobile phone or return calls to his Moscow office. Fabrice Baron, a spokesman for Vallourec in Paris, said the company doesn't comment on ``market rumors.''

Takeovers and better-than-expected earnings have helped lift the pan-European Stoxx 600 this month for a third consecutive gain. Deals have reached $1.25 trillion in Europe this year, compared with a record $1.6 trillion in 2006.

Scottish & Southern gained 0.9 percent to 1,523 pence after the U.K.'s third-largest supplier of electricity and natural gas said full-year profit rose 29 percent to 830.5 million pounds ($1.6 billion), beating analyst estimates. Credit Suisse Group raised its recommendation on the stock to ``outperform'' from ``neutral.''

ASML, BHP

ASML climbed 5 percent to 19.25 euros after Europe's largest maker of semiconductor equipment said it plans to pay 960 million euros in cash to its shareholders. The company will pay 2.04 euros a share and plans to sell euro-denominated bonds to help fund the distribution to shareholders.

BHP Billiton advanced 1.7 percent to 1,230 pence. The world's largest mining company named Marius Kloppers as CEO to succeed to Charles ``Chip'' Goodyear, who's retiring after four years in the top job. Kloppers heads BHP's non-ferrous materials division, which contributes to more than half of the company's profit.

Separately, copper prices rose in London, climbing 2.3 percent to $7,370 a metric tone, after stockpiles fell to a seven-month low. Lead and aluminum also gained.

Anglo American Plc, the world's second-biggest mining company, gained 4.3 percent to 3,039 pence. Xstrata Plc, the fourth-largest copper producer, rose 4.4 percent to 2,902 pence.

Infineon Technologies AG, Europe's second-biggest maker of semiconductors, rallied 3 percent to 11.52 euros. Goldman, Sachs & Co. added the company to its ``conviction buy list.'' The brokerage also raised its share price estimate to 14.5 euros from 12 euros.

Royal BAM

Deutsche Telekom AG, Europe's largest telephone operator, added 0.5 percent to 13.78 euros. Societe Generale SA raised its recommendation for the shares to ``buy'' from ``sell.'' The brokerage also added the phone company to its ``premium list.''

Norsk Hydro ASA increased 3 percent to 215.25 kroner. Norway's second-largest oil company posted a 13 percent rise in first-quarter profit to 5.49 billion kroner ($905 million), after metal prices increased.

Royal BAM Groep NV, the biggest Dutch builder, rallied 8.6 percent to 22.09 euros, the best performer on the Stoxx 600. The company said first-quarter profit jumped 81 percent to 56.7 million euros as it bought a property developer and tapped rising demand for homes. Sales rose 5.7 percent to 1.85 billion euros. Analysts had estimated profit of 35.2 million euros.

Shares of InBev NV, the world's largest brewer by sales, gained 4.8 percent to 62.61 euros on speculation the company may merge with Budweiser maker Anheuser-Busch Cos.

``The name of Bud has been mentioned once again,'' said Andrew French, a sales trader at E*Trade Securities in London. A merger would help Anheuser-Busch ``to fast-track its growth.''

InBev ``doesn't comment on share price movements,'' said spokeswoman Marianne Amssoms. A message left with Anheuser's public relations department today wasn't immediately returned.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net;

Last Updated: May 31, 2007 12:23 EDT