May 23 (Bloomberg) -- European stocks gained, led by German companies such as E.ON AG and Deutsche Bank AG after Chancellor Gerhard Schroeder said he will seek early elections, boosting optimism Europe's largest economy may regain pace.

``What Germany really needs is a change,'' said Matthias Grimm, a fund manager who oversees about $1.3 billion in European equities at Cominvest Asset Management in Frankfurt. ``Maybe new elections could provide the trigger.''

The Dow Jones Stoxx 50 Index added 0.3 percent to 2909.87 as of 9:45 a.m. in London, a fifth straight advance. The broader Stoxx 600 rose 0.2 percent and the Euro Stoxx 50, a gauge for the 12 countries using the euro, climbed 0.4 percent. Germany's DAX Index paced gains among national benchmark indexes.

Chancellor Schroeder, whose party was defeated in a vote in Germany's most populous state, announced yesterday he will seek early elections even as polls show he may lose. The country's DAX Index is the fifth-worst performer among Western Europe's 18 biggest national equity benchmarks this year.

A month ago, Germany's six leading economic institutes halved their forecast for growth this year to just 0.7 percent. The European Commission expects Germany to be the slowest-growing economy in the 25-nation European Union in 2005.

Stock indexes rose in 10 of the 16 largest Western European national markets. The DAX added 0.8 percent. Italy's S&P/MIB Index declined 1.2 percent as some of its largest stocks, such as Mediaset SpA, traded today without the right to their latest dividends.

Power Plants

E.ON, Germany's largest utility, increased 2.2 percent to 68.71 euros. RWE, the No. 2, rose 2.2 percent to 48.20 euros.

Schroeder, under pressure from his coalition partner, the Green Party, has pressed for the closure of nuclear-power plants as a promise to end the nation's dependency on atomic energy. Companies want to keep open the option of nuclear power, as oil costs rise.

Among other stocks that climbed in Germany, Deutsche Bank, the country's biggest lender, rose 1.3 percent to 62.29 euros. Deutsche Telekom AG, the former phone monopoly, rose 2 percent to 15.05 euros. Twenty-three of the DAX's 30 members gained.

Schroeder said he'll seek to hold a national election this fall.

``Schroeder has averted a deadlock'' by calling the early vote, as he lost support, said Dieter Bohlens, an equity strategist at HSH Nordbank AG in Hamburg. ``We could make some kind of headway in the economic front, which is the most important thing right now for Germany.''

Mediaset, Invensys

The DAX had added 2.5 percent this year before today, compared with gains of 7.2 percent and 3.3 percent for France's CAC 40 and the U.K.'s FTSE 100 respectively.

Mediaset, Italy's largest broadcaster, dropped 4.7 percent to 9.55 euros. Investors who buy the stock today will not get the company's dividend on May 26. Separately, the shares were cut to ``equal-weight'' from ``overweight'' by analysts at Morgan Stanley, who said the stock may have outpaced prospects for earnings growth in the industry.

ASML Holding NV, Europe's largest producer of machines to make semiconductors, rose 1.4 percent to 12.76 euros. Global semiconductor sales will this year rise more than earlier forecast because of better- than-expected computer demand and inventory management, market researcher Gartner Inc. said.

Worldwide chip sales will rise 5.9 percent to $233 billion this year and increase 6.5 percent to $248 billion next year, Gartner analyst Andrew Norwood said during a press conference in Seoul today. Gartner had earlier forecast 2005 sales of $228 billion and $232 billion for 2006.

Invensys, British Land

Invensys Plc, a U.K. engineer that has refinanced debts of 2.7 billion pounds ($5.1 billion), dropped 4.2 percent to 11.5 pence. Lehman Brothers Holdings Inc. cut its recommendation on the stock to ``underweight'' from ``equal weight,'' citing increasing costs and worsening business conditions for some of its units. The brokerage slashed a share-price estimate 63 percent to 7 pence apiece.

British Land Co. fell 0.7 percent to 845 pence. The U.K.'s second-biggest property developer agreed to buy Pillar Property Plc, a smaller competitor, for 855 pence a share, as it seeks to enter the retail park market.

Pillar shares added 1.1 percent to 854.4 pence.

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

Last Updated: May 23, 2005 04:49 EDT