European Stocks Gain for Second Week as Fed Backs Up Monetary Easing Bets

European stocks rose for a second week as minutes from last month’s Federal Reserve meeting showed U.S. officials were prepared to ease monetary policy further.

Porsche SE advanced 18 percent as it narrowed its full-year loss. Oil drilling stocks surged after the U.S. lifted a ban on deepwater oil and gas drilling ahead of schedule. ASML Holding NV rose 11 percent after posting better-than-estimated profit. Actelion Ltd. gained 11 percent after it hired investment bankers at Moelis & Co. for advice as the drugmaker considers a potential sale.

The Stoxx 600 Index rose 1.4 percent to 265.83 this week, taking this year’s gain to 4.7 percent and the increase from its 2010 low in May to 15 percent as concern eased that the region’s sovereign debt crisis and slowing growth in China and the U.S. will curb corporate profits.

“Rather than tone down our view on Europe, given currency risks and sovereign issues, we reiterate our buy,” UBS AG’s London-based strategists Karen Olney, Nick Nelson and Matthew Gilman wrote in a report. “QE-2 should be good for risk assets” and “if history is any guide at these sorts of valuation levels buying the equity market would yield ten years of average annual returns of between 10 and 15 percent.”

Quantitative Easing

The Fed on Oct. 12 published minutes from its Sept. 21 meeting showing that it will be ready “before long” to increase purchases of Treasuries. The U.S. central bank also discussed boosting inflation expectations as a way to prop up the economy.

Fed Chairman Ben S. Bernanke said additional monetary stimulus may be warranted because inflation is too low and unemployment is too high. He didn’t offer new details on how the Fed would undertake those strategies or give assurances the central bank will act at its Nov. 2-3 meeting.

In the U.S., a report showed an unexpected increase in jobless-benefit claims in the week ended Oct. 9 and the Thomson Reuters/University of Michigan’s preliminary index of consumer sentiment unexpectedly decreased this month, while retail sales climbed more than forecast in September and manufacturing in the New York region expanded in October at a faster pace than anticipated.

In Europe, the number of U.K. real-estate agents and surveyors saying house prices fell exceeded those reporting gains by 36 percentage points last month, down from minus 32 points in August.

National Benchmarks

National benchmark indexes rose in 16 out of 18 western European markets. Germany’s DAX Index gained 3.2 percent, while the U.K.’s FTSE 100 Index increased 0.8 percent. France’s CAC 40 Index advanced 1.7 percent.

Porsche surged 18 percent after the maker of the 911 sports car reported a full-year net loss of 454 million euros ($637 million) compared with last year’s 3.56 billion-euro loss.

The carmaker forecast that it will break even for the last five months of 2010, and make a profit in 2011 when the carmaker switches to calendar-year reporting.

Cie. Generale de Geophysique-Veritas, the world’s largest seismic surveyor for oil and gas, and TGS-Nopec Geophysical Co. climbed 8.1 percent and 13 percent, respectively, after the U.S. lifted a ban on deepwater oil and gas drilling ahead of schedule.

U.S. President Barack Obama halted drilling in waters deeper than 500 feet (152 meters) after BP Plc’s Macondo well off Louisiana blew out April 20, killing 11 workers and causing the biggest U.S. oil spill. On Oct. 12, Interior Secretary Ken Salazar ended the ban, which was scheduled to expire Nov. 30, while saying companies must meet new safety requirements.

ASML, Actelion

ASML Holding increased 11 percent. Europe’s biggest semiconductor equipment maker said third-quarter profit rose and reiterated that 2010 sales will advance to a record, helped by strong order intake.

Net income increased to 268.5 million euros in the quarter from 19.8 million euros a year earlier. That beat the 247 million-euro average of 20 analysts’ estimates compiled by Bloomberg.

Actelion surged 11 percent. The Swiss biotechnology company that’s considering strategic alternatives hired investment bankers at Moelis for advice as the drugmaker considers alternatives including a potential sale, people with knowledge of the matter said this week.

UBS AG added the stock to its “merger and acquisition watch” list.

Banks, Soco

Banking shares were the worst-performing industry in Europe this week, amid renewed concern that banks may have to raise more capital.

Bank of Ireland Plc lost 8 percent, while Lloyds Banking Group Plc fell 4.4 percent and Barclays Plc retreated 4.1 percent. Barclays, the U.K.’s third-biggest lender, will be “substantially undercapitalized” if the U.K. follows Switzerland in requiring banks to have a minimum core Tier 1 capital ratio of 10 percent, Evolution Securities Ltd. wrote in a note.

Soco International Plc was the worst performer in the Stoxx 600 Index, dropping 23 percent. The U.K. energy explorer in Africa and Southeast Asia said it will plug and abandon its appraisal well off the coast of Vietnam.

To contact the reporter on this story: Francesca Cinelli in Milan at fcinelli@bloomberg.net.

To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net.

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