March 25 (Bloomberg) -- European stocks rallied, led by banks, as the takeover of Bear Stearns Cos. reduced the risk of financial companies collapsing.

UBS AG, the region's biggest bank by assets, gained after JPMorgan Chase & Co. increased its bid for Bear Stearns. HBOS Plc, the U.K.'s largest mortgage lender, jumped as much as 17 percent as the company's executives bought shares. BHP Billiton Ltd., the world's biggest mining company, followed metals prices higher, while Michelin & Cie. gained on plans to link the prices of car tires to the cost of oil.

``The news as a whole is good and Bear Stearns confirms this,'' said Alexandre Iatrides, a fund manager at Richelieu Finance in Paris, which oversees $6.2 billion. He also co-manages the ``Richelieu Valeur'' fund with Nathalie Pelras. ``We've started to buy some shares.''

The Dow Jones Stoxx 600 Index added 3.2 percent to 306.59 as of 4:50 p.m. in London, as all 18 industry groups rose. The gains follow a four-day Easter break and a 1.5 percent advance in the Standard & Poor's 500 Index yesterday.

The Stoxx 600 is down 23 percent from a June high as asset writedowns and credit losses at financial firms reached $200 billion. U.S. stocks climbed yesterday as JPMorgan's revised bid and a report showing a surprise gain in home sales last month bolstered speculation the losses may be contained.

National Markets

National benchmark indexes gained in all of the 17 western European markets that were open. The U.K.'s FTSE 100 climbed 3.5 percent, as did France's CAC 40. Germany's DAX increased 3.2 percent. Most markets were closed yesterday and March 21 for public holidays.

The Stoxx 50 for the region's largest stocks increased 3.2 percent, while the Euro Stoxx 50, which tracks companies in the euro zone, advanced 3.6 percent.

UBS jumped 8.2 percent to 30.2 Swiss francs. HSBC Holdings Plc, Europe's biggest bank by market value, rose 2.5 percent to 827 pence. Barclays Plc, the U.K.'s third-largest bank, increased 7 percent to 459 pence.

Bear Stearns, which almost collapsed before the Federal Reserve helped broker a takeover, nearly doubled yesterday after JPMorgan raised its offer to about $10 a share from $2.52.

Sales of existing homes in the U.S. gained in February, easing concern credit restrictions and falling prices would hurt demand.

Edinburgh-based HBOS climbed rose 15 percent at 544.5 pence.

Buying Stock

HBOS Chief Executive Officer Andy Hornby and other employees bought a total of 1.4 million shares on March 20, the bank disclosed yesterday. U.K. regulators said March 19 they are investigating ``false rumors'' on stocks after HBOS declined to the lowest-ever price on speculation it had funding problems. The bank also denied it had any such problems.

Before today, the shares dropped 36 percent this year.

Commerzbank AG, Germany's second-largest bank, rallied 8.9 percent to 18.84, paring its decline this year to 28 percent. Credit Suisse Group raised its recommendation on the shares to ``outperform'' from ``neutral,'' saying investors have been too worried about the effects of a credit market turmoil, which by now ``look to be contained.''

BHP Billiton jumped 5.1 percent to 1,430 pence. Rio Tinto Group, the third-biggest, added 3.9 percent to 4,985 pence. Copper, lead, nickel, tin and zinc rose in London.

Michelin gained 5.8 percent to 68.62 euros. The world's second-biggest tiremaker said it will link the prices of car tires to the cost of oil after a recent ``dramatic'' increase in oil. Before today, the shares fell 17 percent in 2008.

Richemont, Swatch

Cie. Financiere Richemont SA and Swatch Group AG rose after Tiffany & Co., the world's second-biggest jewelry retailer, reported fourth-quarter profit that beat analysts' estimates.

Richemont, the world's biggest jewelry maker, jumped 6.3 percent to 56.35 francs. Swatch, the world's largest watchmaker, added 4.1 percent to 265 francs.

Uniq Plc, which makes sandwiches and desserts for Tesco Plc, sank 20 percent to 107.25 pence after scrapping its dividend and saying a plan to stem operating losses will take longer than expected.

Aker Yards ASA surged 29 percent to 66 kroner, the steepest gain since the stock started trading in 2004. Europe's largest shipbuilder agreed to sell 70 percent of its ownership in three yards for 291.9 million euros ($455 million).

Tate & Lyle Plc, Europe's biggest sugar refiner, jumped 11 percent to 583 pence. Eurasian Natural Resources Corp., the Kazakh ferrochrome producer, added 10 percent to 976 pence. Both stocks will join the U.K.'s benchmark FTSE 100 Index tomorrow.

Alitalia SpA surged 32 percent to 46 cents after Ansa reported that Air France-KLM Group, picked by Italy's government to bid for its stake in the airline, will present a new proposal aimed at winning union support. Air France gained 0.2 percent to 17.33 euros.

Leon de Bruxelles SA soared 37 percent to 10.34 euros. The French operator of restaurants specializing in mussels and fries had its biggest gain since July 2004 in Paris trading after OFI Private Equity Capital said it plans to buy the company.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.

Last Updated: March 25, 2008 13:26 EDT