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European Stocks Advance Amid China Stimulus Speculation

European stocks rose for a sixth week as China’s slowest expansion in three years fueled speculation policy makers will add to stimulus measures and Italy’s borrowing costs fell at an auction.

Storebrand ASA (STB), Norway’s second-largest publicly traded insurer, rallied 8.2 percent after saying it will meet capital requirements without selling shares. Temenos Group AG (TEMN) rebounded 5.9 percent. PSA Peugeot Citroen (UG) slumped to the lowest price since at least 1989 over concerns that the French government may step in after Europe’s second-largest carmaker announced plans to close a factory and cut jobs.

The Stoxx Europe 600 Index added 1.3 percent to 256.26 at the close of trading. The measure rose 0.7 percent this week, its sixth straight week of gains and the longest streak of advances since April 2010 as Greek leaders formed a government, global central banks added stimulus and euro-area leaders announced on June 29 they will work on addressing flaws in their bailout programs.

“A China slowdown is already priced into the markets and didn’t come as a surprise, and investors see additional stimulus coming in the near future,” said Trung-Tin Nguyen, a hedge-fund manager at TTN AG in Zurich. “Market participants also seem to be interpreting the bond auctions in Europe positively, even Spanish and Italian ones.”

National benchmark indexes gained in all of the 18 western- European (SXXP) markets except Iceland. France’s CAC 40 advanced 1.5 percent and the U.K.’s FTSE 100 climbed 1 percent. Germany’s DAX rose 2.2 percent.

Chinese Economy

China’s growth slowed for a sixth quarter to the weakest pace since the global financial crisis, putting pressure on Premier Wen Jiabao to boost stimulus to secure a second-half economic rebound.

Gross domestic product expanded 7.6 percent last quarter from a year earlier, the National Bureau of Statistics said today. The pace, a three-year low, compares with an 8.1 percent gain in the previous period and the 7.7 percent median forecast of economists. Industrial production increased at a slower pace in June while retail sales growth decelerated.

The Chinese numbers “are probably the best-case scenario for risk assets, as the print was just weak enough to keep the markets’ anticipation of aggressive easing alive, while it was not too hot to take this notion away from the equation,” Chris Weston, an institutional trader at IG Markets in Melbourne, wrote in an e-mail.

Italian Bonds

Italian borrowing costs fell at an auction today, hours after Moody’s Investors Service downgraded the country’s bond rating by two levels to Baa2 from A3 and reiterated its negative outlook, citing the worsening political and economic situation.

Italy sold 3.5 billion euros ($4.3 billion) of new three- year bonds, matching a maximum target, and later sold 1.75 billion euros of three longer-dated securities. The Rome-based Treasury sold the 2015 bond at 4.65 percent, down from the 5.3 percent paid on a similar-maturity bond on June 14. Investors bid for 1.73 times the amount of 3-year debt offered, up from 1.59 times last month.

Still, Italy’s 10-year bonds fell for a second day, pushing the yield to about 6 percent.

The Stoxx 600 Index has gained 4.7 percent since euro-area leaders announced on June 29 plans to ease repayment rules for Spanish banks, relax conditions for possible aid to Italy and unveiled a $149 billion economic growth plan.

European Forecasts

European stock strategists are backing away from their most-pessimistic forecasts as policy makers agree on measures to tackle the region’s debt crisis.

While sticking to predictions for losses of as much as 16 percent, Morgan Stanley’s Ronan Carr raised his recommendation on European equities to neutral on July 2 and Alain Bokobza of Societe Generale SA said he has started to reduce the underweight call he’s had for at least two years. Exane BNP Paribas said investors can find bargains among companies most reliant on economic growth.

Storebrand, Norway’s second-largest publicly traded insurer, rallied 8.2 percent to 24.01 kroner. The company said it will cut costs by at least 400 million kroner ($66 million) by 2014 and meet stricter European capital requirements without selling new shares.

Temenos Group AG gained 5.9 percent to 10.85 francs. The banking-software maker plunged the most in 3 1/2 years yesterday as it cut its revenue-growth forecast and said its chief executive officer will step down.

Ems-Chemie Holding AG (EMSN) climbed 1.2 percent to 180 Swiss francs after the maker of engineering plastics for cars and electronics reported first-half sales of 904 million francs ($918 million), topping the average analyst estimate of 894 million francs. First-half earnings before interest and tax were 167 million francs, more than the 157.8 million francs estimated by analysts.

Deutsche Telekom

Deutsche Telekom AG (DTE) gained 5.7 percent to 9.18 euros after Credit Suisse Group AG raised its rating on the company’s shares to neutral from underperform.

Neopost SA (NEO) rose 4.8 percent to 42.93 euros after saying it bought customer communication management company GMC Software Technology. GMC posted 2011 sales of 42 million francs, the company said. Separately, Natixis SA raised the manufacturer of mailing and shipping equipment to buy from neutral.

Elisa Oyj (ELI1V), Finland’s largest wireless carrier by subscribers, jumped 5.7 percent to 16.80 euros as second-quarter sales of 389 million euros beat the average 384.2 million-euro analyst estimate.

Peugeot Slumps

Peugeot dropped 7.7 percent to 6.48 euros, for the worst performance on the Stoxx 600 and the lowest price since at least October 1989. The company announced plans yesterday to close the first auto factory in France in 20 years and cut a total of 14,000 jobs, or 6.7 percent of its workforce, to stem mounting losses. Industry Minister Arnaud Montebourg said the government doesn’t “accept the plan as it is.”

Nokia Oyj (NOK1V) fell 2.5 percent to 1.51 euros after the mobile- phone maker struggling to recover lost market share said it will close two of its four regional distribution centers in China as part of a restructuring plan it announced last month to halt mounting losses from plunging smartphone sales. Nokia on June 14 said it would cut as many as 10,000 jobs globally and close facilities.

A gauge of European lenders performed the worst of the 19 industry groups on the Stoxx 600. Deutsche Bank AG slipped 1.9 percent to 25.60 euros and Bankia SA declined 7 percent to 65.1 euro cents.

Booker Group Plc (BOK), the largest U.K. food wholesaler, slumped 2.6 percent to 88.95 pence after Shore Capital Group Ltd. cut the stock to sell from hold.

Sika AG (SIK), Europe’s biggest maker of chemicals used in construction, lost 4.1 percent to 1,770 francs after Serge Rotzer, an analyst at Vontobel Holding AG, downgraded the company’s shares to hold from buy.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

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

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