European Shares Advance, Rebounding From Two-Year Low; Eni Gains on Libya

European stocks rebounded from a two-year low amid speculation the Federal Reserve may this week signal additional stimulus measures and as prospects for an end to the war in Libya boosted energy companies.

Eni SpA (ENI) and Petrofac Ltd. (PFC) led a rally in oil companies, both rising more than 3 percent. Petropavlovsk Plc (POG) jumped 6.2 percent as Citigroup Inc. upgraded the gold producer and the precious metal advanced to an all-time high. Jyske Bank A/S dropped 7.6 percent as earnings missed estimates.

The benchmark Stoxx Europe 600 Index rose 0.8 percent to 224.9 at the 4:30 p.m. close in London, having earlier lost the same amount. The gauge retreated 6.1 percent last week, extending its decline from this year’s high to 23 percent, as European and U.S. economic data that trailed forecasts added to concern the global recovery is at risk. The retreat has left the Stoxx 600 trading at about 9.3 times its companies’ estimated earnings, near the lowest since March 2009, Bloomberg data show.

“We believe the Fed will want to reassure markets and could use Friday’s Jackson Hole symposium to do so,” Graham Bishop, an equity strategist at Royal Bank of Scotland Group Plc in London, wrote in a report. “The Fed’s commitment to keep rates on hold until 2013 is, arguably, the precursor to a more significant policy announcement.”

The Fed is holding its annual symposium in Jackson Hole, Wyoming, this weekend. This time last year Chairman Ben S. Bernanke hinted that the central bank might embark on a second round of asset purchases, kicking off a 28 percent rally in the S&P 500 that ended in a three-year high on April 29.

Fed Stimulus

Record-low yields on Treasuries show traders expect Bernanke to signal the bank will begin a third program of bond buying to boost the economy. Barclays Plc said 10-year yields indicate traders have priced in $500 billion to $600 billion of Treasury purchases by the Fed. Citigroup said current rates can only be justified by more bond buying or assuming the economy will shrink by 2 percent.

National benchmark indexes climbed in 12 of the 18 western European markets. The U.K.’s FTSE 100 Index (UKX) and France’s CAC 40 Index each increased 1.1 percent, while Germany’s DAX Index slipped 0.1 percent.

Gains in European stocks were limited as German Chancellor Angela Merkel resisted calls for common euro-area borrowing. Speaking in an interview with ZDF television from the chancellery in Berlin yesterday, she said bringing in euro bonds at this time would further undermine economic stability.

ECB Purchases

The European Central Bank spent less on government bonds last week as yields fell in Italy and Spain. The Frankfurt-based ECB said today it settled purchases worth 14.3 billion euros ($20.6 billion) in the week through Aug. 19, down from the 22 billion euros it spent the previous week.

Eni, the Italian oil company that was the biggest foreign producer in Libya, rallied 6.3 percent to 13.27 euros after rebel fighters reached the capital Tripoli. The overthrow of Muammar Qaddafi’s government may allow Eni and other oil producers to start fields closed by the civil war.

Petrofac, which said today it expects to bid for work in Libya after the end of the conflict, added 3.7 percent to 1,211 pence. The oilfield-services provider also reported first-half earnings rose 6.6 percent to $246.3 million.

Total SA (FP), France’s largest oil company, climbed 2.3 percent to 32.71 euros.

Petropavlovsk jumped 6.2 percent to 779 pence as Citigroup upgraded the producer of gold in Russia to “buy” from “hold” and the precious metal rallied for a sixth day.

Avocet, GDF

Avocet Mining Plc (AVM) surged 6.2 percent to 257.25 pence after the producer of gold in West Africa upgraded the resource estimate at its Inata mine in Burkina Faso.

GDF Suez (GSZ) SA, Europe’s largest natural-gas network operator, climbed 3.5 percent to 20.17 euros, leading a rally in utilities. BofA Merrill Lynch Global Research named the company among its preferred utility stocks, saying GDF provides “attractive relative valuations over the next 12 months.”

Suez Environnement, Europe’s second largest water company, gained 1.8 percent to 11.40 euros and International Power Plc (IPR) increased 2.7 percent to 301.9 pence.

IG Group Holdings Plc (IGG) climbed 4 percent to 409.4 pence after the owner of the IG Index financial spread-betting brand said sales for the first quarter may increase 19 percent as more people place wagers because of recent market swings. Revenue will rise to more than 94 million pounds ($155 million) for the quarter ending Aug. 31, from 79.1 million pounds a year earlier.

ICAP Plc (IAP), the world’s largest broker of trades between banks, gained 3.8 percent to 425 pence and Tullet Prebon Plc increased 1.7 percent to 335.5 pence.

Danish Banks

Jyske Bank dropped 7.6 percent to 145.80 kroner after Denmark’s second-largest lender reported a 47 percent decline in second-quarter net income of 88 million kroner ($17 million) that missed the average analyst estimate of 260 million kroner, according to a Bloomberg survey.

Sydbank A/S, Denmark’s third-largest publicly traded lender, lost 3.1 percent to 97.50 kroner and Danske Bank A/S slid 3.6 percent to 74.35 kroner.

Micro Focus International Plc (MCRO) fell 3.4 percent to 254 pence after the company said it terminated talks with possible bidders. The U.K. software provider said it’s restarting a program to buy back as many as 12.3 million shares under its existing authority.

Essar Energy Plc (ESSR) dropped 3.8 percent to 247.9 pence amid delays in setting up power plants and gaining approval for coal projects. The Indian energy company said regulators stalled approval of some coal-bed methane projects, which generate natural gas from coal fields.

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

To contact the editor responsible for this story: Andrew Rummer in London at arummer@bloomberg.net;

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