Europe Stocks Post Weekly Gain on Global Economic Outlook

European stocks posted their biggest weekly rally since early February as reports from the U.S. to Germany indicated growth is gaining pace and the Federal Reserve raised its assessment of the world’s biggest economy.

Shares of insurance (SXIP) companies and banks led the advance, with Aegon NV (AGN) and Credit Suisse Group AG jumping at least 11 percent each. Pirelli & C. SpA (PC), Europe’s third-largest tiremaker, soared 15 percent as profit beat analysts’ estimates.

The Stoxx 600 Europe Index climbed 2.6 percent to 272.40 during the week. The measure has rallied 11 percent this year on optimism that the euro area will contain the sovereign-debt crisis and as U.S. economic reports beat forecasts.

“The U.S. economy is a very, very strong support for the market,” said Pierre Mouton, a fund manager who helps oversee $7.5 billion at Notz Stucki & Cie. in Geneva. “The data is confirming that the economy really is rebounding, and more rapidly than expected. We’ve turned the page.”

The mean daily volume of shares changing hands on the Stoxx 600 this week was 8.6 percent higher than the average in the last 12 months, according to data compiled by Bloomberg. The VStoxx Index (V2X), which measures the cost of option prices on the Euro Stoxx 50 index, slid 4.3 percent to 18.52 on March 16, its lowest level since April.

Gathering Strength

Strains in global financial markets have eased and the U.S. labor market is gathering strength, the Federal Open Market Committee said on March 13. At the same time, the unemployment rate is “elevated” and “significant downside risks” remain, it said. Federal Reserve Chairman Ben S. Bernanke is sticking to his plan to the keep benchmark interest rate close to zero through at least 2014.

In Germany, the ZEW Center for European Economic Research in Mannheim said on March 13 its index of investor and analyst expectations, which seeks to predict economic developments six months in advance, rose to 22.3 from 5.4 in February. That was the fourth straight increase.

The number of Americans applying for jobless benefits fell by 14,000 to 351,000 in the week ended March 10, U.S. Labor Department figures showed on March 15. That matched a four-year low, first reached a month earlier.

National benchmark indexes rose in all of Europe’s 18 western markets except Portugal. France’s CAC 40 Index jumped 3.1 percent, the U.K.’s FTSE 100 Index added 1.3 percent, while Germany’s DAX Index rallied 4 percent.

New York, Philadelphia

Manufacturing in the New York region expanded in March at the fastest pace since June 2010, while Philadelphia factory output grew the most in almost a year, according to reports on March 15.

Retail sales in the U.S. rose in February by the most in five months, a report on March 13 showed, reflecting broad-based gains that indicate the world’s largest economy is picking up. The 1.1 percent advance matched the median forecast of 81 economists surveyed by Bloomberg News and followed a 0.6 percent increase in January that was larger than previously estimated, Commerce Department figures showed in Washington.

Confidence among U.S. consumers unexpectedly dropped in March, a sign rising fuel costs may be starting to weigh on the economic outlook, a report showed on March 16. American industrial production was little changed in February, another release on the same day showed.

Greek Rescue

Finance ministers from the 17 nations that use the euro approved the 130 billion-euro second bailout package for Greece, at their meeting in Brussels on March 12. The agreement capped months of grueling negotiations between Greece, the IMF and euro-area authorities.

Hellenic Telecommunications Organization SA (HTO), a Greek phone company, surged 15 percent for the largest increase in the benchmark ASE index, which has gained 12 percent so far this year.

Insurance (SXIP) shares rallied 7 percent, for the biggest gain among the 19 industry groups in the Stoxx 600 as U.S. Treasury yields rose, highlighting reinvestment opportunities. The yield on the 2 percent note has risen 28 basis points this week, the most since July. Aegon, the Dutch owner of U.S. insurer Transamerica Corp., jumped 15 percent. Axa SA (CS), Europe’s second- largest insurer, soared 10 percent.

Banks posted the second-largest increase, climbing 5.3 percent and tracking gains in U.S. bank shares. The Fed on March 13 said 15 of the nation’s largest 19 banks could maintain adequate capital levels even in a recession scenario.

Credit Suisse (CSGN), Switzerland’s second-biggest bank, increased 11 percent. Deutsche Bank AG (DBK), Germany’s largest, gained 9.8 percent.

Pirelli, Aixtron

Pirelli surged 15 percent. The company on March 12 posted 2011 profit of 451.6 million euros, exceeding the 314.3 million- euro analyst estimate, and increased its dividend to 27 euro cents.

Aixtron SE, which manufactures equipment for the semiconductor industry, soared 19 percent. The stock was raised to buy from hold at Deutsche Bank AG on March 15. The analysts cited “early indications of a recovery in the LED industry demand.”

Marine Harvest ASA (MHG), the world’s biggest salmon farmer, jumped 13 percent after Nordea Markets advised investors to stop selling the stock because fish prices are higher than expected. Nordea on March 13 raised its recommendation on the stock to hold from sell, and RS Platou Markets lifted its recommendation on the shares to buy from neutral the next day.

Home Retail Group Plc (HOME), the Argos chain owner, advanced 14 percent. JPMorgan Chase & Co. recommended buying the shares in a note to investors on March 14 as U.K. shoppers return to stores in a “more stable” economy.

Randgold Resources Ltd. (RRS), a miner of the precious metal in Africa, sank 9.8 percent as the price of gold dropped 3.4 percent this week in London.

Davide Campari-Milano SpA (CPR) tumbled 7.8 percent. The maker of Wild Turkey bourbon on March 12 reported full-year net income of 159.2 million euros, missing the average analyst estimate of 172.3 million, according to data compiled by Bloomberg.

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

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

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