European Stocks Surge Most in Three Months; BHP, Santander Jump

European stocks jumped by the most in three months, rebounding from an eight-week low, amid speculation European Central Bank policy makers may step up measures to contain the region’s sovereign debt crisis.

BHP Billiton Ltd. and Rio Tinto Group soared more than 3 percent as Chinese manufacturing expanded for a fourth month. Banco Santander SA and Bilbao Vizcaya Argentaria SA led a rally in banks as European bond risk fell from record levels. Carrefour SA plunged the most in seven months after the world’s second-largest retailer cut its earnings forecast.

The benchmark Stoxx Europe 600 Index soared 2 percent to 267.11 at the 4:30 p.m. close in London, the biggest gain since Sept. 1. The gauge had retreated for the past three days as a European Union-led bailout of Ireland failed to reassure investors that the debt crisis won’t spread.

“Given the severity of recent declines it’s not surprising to see a bounce today,” said Ioan Smith, a London-based director at Knight Capital Europe Ltd. “The focus very much remains on what’s happening in bond markets. It’s all about what the ECB does next. This is a big moment for the market, it will go a long way in determining what happens next year.”

The euro rose against the dollar and the yen on speculation ECB policy makers will again delay their exit from emergency liquidity measures at tomorrow’s meeting of the Governing Council in Frankfurt.

Benchmark Indexes

National benchmark indexes advanced in all 18 western European markets, with gauges in Spain, Italy and Greece rising more than 2 percent. Portugal’s PSI-20 rallied 3 percent even as Standard & Poor’s said it may cut the nation’s credit rating.

BHP Billiton, the world’s largest mining company, gained 3.4 percent to 2,363 pence as copper led base metals higher on the LME. Rio Tinto advanced 3.1 percent to 4,207 pence. Xstrata Plc jumped 5.8 percent to 1,367 pence.

China’s Purchasing Managers’ Index for November rose to 55.2, the fastest pace in seven months, from 54.7 in October, according to the China Federation of Logistics & Purchasing. The result was more than the 54.8 median economist forecast in a Bloomberg News survey.

Santander, Spain’s largest bank, surged 7.2 percent to 7.82 euros and BBVA climbed 7.3 percent to 7.59 euros. EFG Eurobank Ergasias SA, Greece’s second-largest lender, rallied 11 percent to 4.28 euros and Italy’s Banca Carige SpA increased 6.5 percent to 1.6 euros.

Banks Gain

A gauge of European bank stocks climbed the most in four months as Portugal and Ireland led a decline in the cost of insuring against losses on government and corporate bonds in Europe. Contracts on Belgium, Italy, and Spain also fell from record levels, helping to push down the region’s benchmark index of sovereign swaps from an all-time high.

Deutsche Bank AG Chief Executive Officer Josef Ackermann said investors’ mistrust of Spain was unjustified and problems in the banking industry are “manageable.”

Porsche SE climbed 6.2 percent to 61.43 euros after investors approved plans for a 5 billion-euro ($6.5 billion) stock sale to reduce the sports-car maker’s debt as it prepares to combine with Volkswagen AG, Europe’s largest carmaker.

VW preferred shares gained 3.2 percent to 127.80 euros.

Royal Philips Electronics NV rose 3.3 percent to 21.49 euros after the world’s biggest lighting company confirmed its forecast for 2010 earnings before interest, taxes, and amortization.

U.K. Insurers

Prudential Plc climbed 5.5 percent to 599 pence, pacing a rally in U.K. insurers, after saying it plans to double profit in Asia by 2013.

Separately, the Nikkei newspaper reported that MS&AD Insurance Group Holdings Inc. is seeking to acquire a U.K. insurer, citing an interview with Yasuyoshi Karasawa, president of the unit.

Aviva Plc, the U.K.’s second-biggest insurer, rose 4.1 percent to 369.2 pence and Legal & General Group Plc increased 3.5 percent to 94.6 pence.

De La Rue Plc soared 10 percent to 637 pence, the biggest gain in seven years, after the Financial Times cited a BofA Merrill Lynch report giving the world’s biggest printer of banknotes a “fair value” of as much as 830 pence a share.

Sage Group Plc, the U.K.’s largest software maker, gained 5.3 percent to 271 pence after full-year profit beat analyst expectations.

Rival Micro Focus International Plc advanced 8.5 percent to 359.4 pence as Jefferies Group Inc. upgraded the shares to “hold” from “underperform,” citing “a period of sustained underperformance.”

Bwin, PartyGaming

Bwin Interactive Entertainment AG and PartyGaming Plc, the online gambling companies that are in the process of merging, climbed 8.4 percent to 35.05 euros and 7.5 percent to 252 pence, respectively.

Carrefour posted the biggest decline in the Stoxx 600, plummeting 5.6 percent to 32.90 euros, the biggest drop since May. The retailer cut its 2010 profit forecast for the second time in two months, citing increased writedowns in Brazil and lower-than-expected demand in Europe.

Analysts at Deutsche Bank AG and Barclays Plc lowered their recommendations for Carrefour’s shares to “hold” and “equal weight,” respectively. Royal Bank of Scotland Group Plc and Citigroup Inc. reduced their share-price estimates.

Thomas Cook Group Plc fell 4.5 percent to 178 pence. Europe’s second-biggest tour operator posted a full-year loss of 2.6 million pounds ($4 million) as the shutdown of European airspace after a volcanic eruption disrupted travel business and led to one-time costs.

Numis Securities lowered its recommendation for the tour operator to “hold” from “add.”

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

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

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