European Stocks Climb as Japan Backs European Debt; HSBC Rallies

European Stocks, U.S. Index Futures Climb
Traders work at the Frankfurt Stock Exchange in Frankfurt. Photographer: Hannelore Foerster/Bloomberg

European stocks surged to a 28-month high as Japan pledged to buy euro-area bonds, joining China in helping to alleviate the region’s debt crisis.

HSBC Holdings Plc, Europe’s largest bank, and Barclays Plc rallied more than 2 percent after analysts recommended the shares. Mining companies advanced as copper climbed in London and JPMorgan Chase & Co. upgraded BHP Billiton Ltd. Siemens AG rose 3 percent after the engineering company said it’s confident of reaching its full-year targets.

The benchmark Stoxx Europe 600 Index gained 1.3 percent to

281.98 at the 4:30 p.m. close in London, the highest level since September 2008. The gauge has climbed for five of the past six weeks amid speculation that the global economic recovery will continue, boosting company earnings.

“We are positive for the year but it’s not going to be in a straight line, there is no question that the fragility of sentiment remains,” said Richard Hunter, head of U.K. equities at Hargreaves Lansdown Plc in London. The news from Japan “is a positive but the concern at the front of the market’s mind is indeed Portugal.”

Portugal, Spain and Italy are scheduled to sell debt this week following a slump in euro-area government bonds last week.

National benchmark indexes climbed in all 18 western European markets. The U.K.’s FTSE 100 and Germany’s DAX increased 1 percent and 1.2 percent respectively, while France’s CAC 40 gained 1.6 percent. Portugal’s PSI-20 Index rallied 2.4 percent, rebounding from a four-day slide.

European Bonds

Japanese Finance Minister Yoshihiko Noda said today it’s “appropriate” for his nation to buy bonds issued by Europe’s financial-aid funds later this month. Japan will use its foreign-exchange reserves to buy more than a fifth of the bonds that the European Financial Stability Facility will issue later in January, Noda said.

China has also voiced support for Europe, with Vice Premier Li Keqiang last week expressing confidence in Spain’s financial markets and pledging to buy more of that country’s debt.

Alcoa Inc. unofficially kicked off the fourth-quarter earnings season in the U.S. yesterday, reporting its highest profit in nine quarters. The shares fell in New York trading after sales missed analyst’s estimates. A further five Standard & Poor’s 500 Index companies are scheduled to report results this week, including Intel Corp. and JPMorgan.

HSBC rose 2.4 percent to 688.7 pence after Citigroup Inc. upgraded the bank to “buy” from “hold,” saying it may increase dividends from 34 cents in 2010 to 65 cents in 2013.

Barclays Gains

Barclays increased 5.5 percent to 292 pence as BofA Merrill Lynch Global Research raised its price estimate for Britain’s third-biggest bank by 35 percent to 500 pence and reiterated its “buy” recommendation.

Separately, strategists at Societe Generale SA upgraded Europe’s banking industry to “overweight,” citing “attractive” valuations and an improved economy.

BHP Billiton led a rebound in mining companies, climbing

1.8 percent to 2,519 pence after JPMorgan upgraded the world’s largest mining company to “neutral” and copper advanced on the London Metal Exchange as investors bought the metal after the longest slump since June. Nickel and zinc also rose.

Siemens, which reports earnings on Jan. 25, gained 3 percent to 91.48 euros after Europe’s largest engineering company said it aims for profit from continuing operations to gain at least 25 percent to 35 percent, while organic sales should rise “moderately” in the full year.

Continental, ARM

Continental AG rallied 4 percent to 60.83 euros. Europe’s second-biggest tiremaker beat sales and earnings goals for 2010 as unusually snowy weather in Europe propelled fourth-quarter winter-tire sales.

ARM Holdings Plc jumped 7 percent to 497.5 pence after CNBC “Mad Money” host Jim Cramer recommended the designer of chips for Apple Inc.’s iPhone as one of seven technology takeover targets. Morgan Stanley yesterday named ARM as one of its top picks for chipmakers in 2011.

Alstom SA increased 6.3 percent to 37.20 euros after Morgan Stanley upgraded the maker of trains and turbines to “overweight” from “equal weight” and raised its price estimate for the shares by 49 percent to 52 euros.

Separately, Alstom agreed to create a joint venture with Bouygues SA to develop and provide energy-management services.

CSR Plc soared 16 percent to 413 pence after the company settled a patent dispute with Broadcom Corp., the biggest maker of chips for television set-top boxes, over technology used in global positioning systems. Financial terms weren’t disclosed.

Gemalto, Wolseley

Gemalto NV surged 6.9 percent to 33.50 euros. Deutsche Bank AG increased its price estimate on the maker of smartcards to 44 euros from 42 euros and reiterated a “buy” rating, saying in a note that “Gemalto is suffering from a lack of investors’ confidence on its prospects.”

Wolseley Plc rose 5.9 percent to 2,179 pence after analysts at Deutsche Bank and Citigroup raised their share-price estimates for the world’s largest supplier of heating and plumbing products.

Aixtron SE advanced 6.6 percent to 32.43 euros as Commerzbank AG upgraded the maker of equipment used to produce light-emitting diode screens to “buy” from “hold.” The brokerage said it expects “order intake to stall at a high level,” according to a note today.

Oriflame Cosmetics SA led falling shares in the Stoxx 600, losing 6.8 percent to 323.4 kronor as the maker of cosmetics said fourth-quarter sales were “slightly weaker than expected.”

Capital Shopping Centres Group Plc slid 2.8 percent to

381.7 pence after Simon Property Group Inc. said it has no intention of making a firm offer for the U.K.’s biggest shopping-mall owner.

Sarah Jones in London at

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