March 21 (Bloomberg) -- European stocks rose for a second week, led by financial firms, after Barclays Plc and HSBC Holdings Plc reported a “strong” start to 2009 and the Federal Reserve pledged to buy $300 billion in U.S. government bonds.

Barclays, the U.K.’s third-biggest lender, surged 42 percent, while HSBC, Deutsche Bank AG and UBS AG also climbed. Companies relying on U.S. sales, including Royal Ahold NV, limited gains in the Dow Jones Stoxx 600 Index as the dollar tumbled, while Group Danone SA paced losses among businesses less geared to economic growth.

The Stoxx 600 advanced 2.4 percent to 172.58. The gauge measure has rebounded 9.3 percent since reaching a 12-year low March 9 as Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. said they made money during the first two months of 2009, trimming this year’s drop to 13 percent.

“We had had a very aggressive sell-off, investors were very defensive, and there was a lot of cash on the side,” said Adrian Darley, who helps oversee about $101 billion as head of equities at Ignis Asset Management Ltd. “There’s been a lot of value in the market for a while.”

National benchmark indexes climbed in all 18 western European markets except Luxembourg this week. The U.K.’s FTSE 100 rose 2.4 percent, led higher by Aviva Plc. Germany’s DAX added 2.9 percent, and France’s CAC 40 advanced 3.2 percent as Axa SA rallied.

Credit Losses

Banks in the region have underpinned a 21-month market rout as they reported more than $370 billion in credit losses. Fed Chairman Ben S. Bernanke said in an interview broadcast on CBS Corp.’s “60 Minutes” that, should the U.S. government succeed in stabilizing financial markets, the recession will probably end this year and the economy will expand in 2010.

The Fed’s announcement that it will buy Treasury securities and step up purchases of mortgage bonds boosted expectations credit markets may thaw and the global economic slump might come to an end earlier than previously expected.

“Markets have seen an increase in signs pointing to an end of the stressed phase,” said Gunnar Stangl, head of portfolio strategy at Dresdner Kleinwort in Frankfurt. “While the recession still has to run its course around the globe, valuations may start to set their sights beyond the downturn.”

Finance chiefs from the Group of 20 last weekend vowed to work together to clean up the toxic assets that helped trigger the worst financial crisis since the Great Depression. G-20 officials outlined guidelines on how governments should rid banks of distressed securities.

Bank of England

The Bank of England said it will start buying “high- quality” corporate bonds from banks as soon as next week.

Barclays surged 42 percent after saying its businesses continue to perform well. The British lender also said it has held talks about the sale of iShares, an exchange-traded funds unit. HSBC said business performance in January was “strong,” while February’s was “in line” with its expectations. HSBC shares gained 3.4 percent.

Deutsche Bank, Germany’s largest bank, rallied 9.9 percent. UBS AG climbed 18 percent as Switzerland’s biggest bank offered to buy back 1 billion euros ($1.3 billion) of its subordinated debt to boost capital.

Banks in the Stoxx 600 added 10 percent as a group, while a measure for insurers soared 13 percent. Axa, the largest French insurer, advanced 22 percent and Aviva, Britain’s biggest, rose 20 percent.

Dollar Tumbles

Shares of companies reliant on revenue from overseas declined after the euro advanced against the dollar, reaching a two-month high this week.

Ahold, the Dutch owner of the Stop & Shop chain in the U.S., retreated 6.4 percent. Royal Philips Electronics NV, the world’s largest maker of patient-monitoring systems, fell 5.1 percent. The U.S. is the company’s largest single market.

The Fed’s move “creates oversupply of liquidity in the U.S. relative to the rest of the world,” said Winfried Hutmann, who helps oversee $21 billion as chief investment officer at Frankfurt Trust. “The danger for us is overly low U.S. dollar and overly high euro, which weakens our competition situation.”

Food and drug companies, which are less dependent on economic growth, also dropped. Brokerages including UBS advised investors to pare holdings in so-called defensive industries on expectations they will lag behind in an economic recovery.

“The more aggressive policy response increases the likelihood of our central scenario: a recovery in the U.S. economy” in the second half, wrote London-based Nick Nelson, a strategist at UBS, in a report. He advised adding to holdings of financial and technology companies.

Danone, Fresenius Medical

Danone, the world’s biggest yogurt maker, dropped 5 percent. Fresenius Medical Care AG sank 13 percent as the biggest provider of kidney dialysis was lowered to “neutral” from “buy” by Bank of America analysts on concern changes to U.S. health-care policy may depress sales.

FirstGroup Plc jumped 26 percent after the U.K.’s largest train operator said a “strong” second-half performance will help it meet its fiscal-year earnings goals.

Zodiac Aerospace SA tumbled 21 percent as the maker of aircraft seats and automotive components said it would miss its full-year operating profit target because of a slowdown in the air-bag market.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.

Last Updated: March 21, 2009 04:45 EDT