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European Stocks Climb, Erasing Losses From Lehman Bankruptcy

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European stocks rose, erasing losses that followed Lehman Brothers Holdings Inc.’s 2008 bankruptcy, amid speculation that the economic recovery is strong enough to withstand the region’s sovereign-debt crisis.

Volkswagen AG, Europe’s biggest automaker, soared 3.7 percent after saying it expects sales in China to grow as much as 15 percent next year. Abertis Infraestructuras SA added 1.3 percent as the Sunday Times said CVC Capital Partners Ltd. may bid for the Spanish highway operator. Retailers retreated as snow disrupted holiday shopping.

The benchmark Stoxx Europe 600 Index climbed 0.7 percent to 278.38 at the 4:30 p.m. close in London, the highest level since Sept. 12, 2008, the last trading day before Lehman’s collapse. The gauge has advanced 6.3 percent this month as U.S. reports showed claims for unemployment benefits unexpectedly fell, builders began work on more homes and manufacturing in the New York region rebounded more than forecast.

“The start of 2011 might be quite good as we still have a lot of liquidity driving the market,” said Michael Koehler, head of strategy at Landesbank Baden-Wuerttemberg in Mainz. “The latest economic data that we got, especially from the U.S., was overall really good and we will definitely not see a double dip. Though, the sovereign debt crisis issue is still not solved.”

Financial Crisis

The Stoxx 600 plunged 44 percent through March 2009 as the collapse of Lehman Brothers fueled the worst financial crisis since the Great Depression, causing banks worldwide to book writedowns and losses of more than $1.8 trillion.

France risks losing its top AAA grade as Europe’s debt crisis prompts a wave of downgrades that threatens to engulf the region’s highest-rated borrowers, with Belgium also facing a possible cut, analysts and investors said.

“Every sovereign may get penalized in the year ahead,” said Toby Nangle, who helps oversee $46 billion as director of asset allocation at Baring Asset Management in London. “It would a big deal if France was to have its AAA rating stripped. I don’t think the likelihood of a downgrade is reflected in the market.”

National benchmark indexes rose in 14 of the 18 western European markets today. France’s CAC 40 and Germany’s DAX gained 0.5 percent. The U.K.’s FTSE 100 advanced 0.3 percent.

VW Gains

Volkswagen preferred shares climbed 3.7 percent to 126.25 euros as the carmaker said it expects group sales in China to grow 10 to 15 percent next year.

“The total market next year looks pretty healthy for us,” said Soh Weiming, the automaker’s executive president for China, in an interview at the Guangzhou Auto Show.

Separately, Audi AG, Volkswagen’s luxury-car brand, will probably beat its target for A1 deliveries next year and may further increase production to meet demand for the subcompact, the unit’s sales chief said.

Abertis Infraestructuras gained 1.3 percent to 13.63 euros as the Sunday Times reported that CVC Capital Partners, which bought a minority stake in Abertis earlier this year, is preparing a 12 billion-euro ($15.8 billion) bid for the company.

Banco Popolare SC jumped 5.6 percent to 3.50 euros on speculation that Fondazione Cariverona may buy a stake through the lender’s 2 billion-euro rights offer and after Goldman Sachs Group Inc. upgraded the stock.

888, Mobistar

888 Holdings Plc rallied 18 percent to 57.75 pence, the biggest gain since its initial share sale in 2005. The online gambling company said it’s in the early stages of discussions with Ladbrokes Plc about a possible takeover offer.

Mobistar SA advanced 3.8 percent to 47.42 euros after Belgium’s second-biggest mobile-phone company was upgraded to “buy” at Deutsche Bank AG.

Rhodia SA climbed 7.2 percent to 24.39 euros, the highest price in almost three years. The specialty chemical company is confident it will be able to defend its profit margins in 2011 as raw-material prices, while at a high level, remain about stable, Investir reported, citing an interview with Chief Executive Officer Jean-Pierre Clamadieu.

Morgan Stanley upgraded the stock to “overweight” from “equal weight.”

Retail stocks had the only drop out of 19 industry groups in the Stoxx 600 as the snow disrupted holiday shopping. Inditex SA, the world’s largest clothing retailer, declined 2.7 percent to 56.60 euros. Dixons Retail Plc, the U.K.’s biggest consumer-electronics retailer, retreated 6.2 percent to 22.84 pence.

Metro Slides

Metro AG, Germany’s largest retailer, lost 2.6 percent to 54.37 euros. Haniel & Cie. GmbH is considering reducing its stake in the company, Wirtschaftswoche reported, citing unidentified people close to the company.

Haniel aims to establish a “more balanced portfolio” by investing in small companies, spokesman Dietmar Bochert said today. He declined to comment on whether the company plans to reduce its Metro stake. Ruediger Stahlschmidt, a spokesman for Metro, declined to comment.

Gartmore Group Plc plunged 8.6 percent to 95.75 pence after the U.K. fund manager that put itself up for sale in November said it’s discussing a takeover proposal with Henderson Group Plc on the basis of a “slight discount” to its Dec. 16 closing share price of 98.75 pence. Henderson Group, which aims to expand its consumer business and emerging-market operations, rose 0.1 percent to 130.6 pence.

Ingenico SA sank 5.6 percent to 26.05 euros as the world’s largest maker of card payment terminals said that a bidder for the company has not been in a position to submit a binding offer that is acceptable to its board.

Allied Irish Banks Plc slumped 8.9 percent to 41 euro cents as the Sunday Business Post said Ireland’s government may use new powers to take full control of the lender as early as this week. A spokesman for Ireland’s Finance Ministry declined to comment on the report. Ronan Sheridan, a spokesman for the bank, also declined to comment.

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