European stocks advanced, trimming the biggest weekly loss in two months, amid speculation that policy makers have discussed a proposal to drop private-sector involvement from their permanent bailout mechanism.
Royal Dutch Shell Plc, Total SA and Statoil ASA led the rebound, climbing more than 1.5 percent each. Axa SA, the biggest French insurer, jumped 1.7 percent after Goldman Sachs Group Inc. recommended buying the shares. Blacks Leisure Group Plc tumbled after saying it needs more funds to carry out a turnaround.
The Stoxx Europe 600 Index gained 0.7 percent to 221.54 at the close. The gauge still lost 4.6 percent this week, for its biggest weekly slump since Sept. 23, as policy makers differed on how to tackle the debt crisis and borrowing costs surged in Italy and Spain.
“There’s no doubt markets have had a tough ride and policy makers may be forced to heed the call,” said Luis Benguerel, a trader at Interbrokers in Barcelona, Spain. “The question is more what form and shape some kind of intervention or aid may take.”
Euro-area states are considering dropping private sector involvement from the permanent bailout mechanism as part of wider treaty change discussions, Reuters reported, citing European Union officials.
German Chancellor Angela Merkel and French President Nicolas Sarkozy “confirmed their support for Italy, saying that they are aware that the collapse of Italy would inevitably lead to the end of the euro,” Italian Prime Minister Mario Monti told a Cabinet meeting, according to an e-mailed statement.
Italy sold six-month bills today, at double the yield compared with the last auction on Oct. 26. The Rome-based Treasury sold 8 billion euros ($10.6 billion) of 183-day bills to yield 6.504 percent. The yield at the sale last month was 3.535 percent.
The country’s bonds and bank shares fell after the sale. Banca Monte dei Paschi di Siena SpA declined 1.2 percent to 24 euro cents. Banca Popolare dell’Emilia Romagna Scrl slipped 3 percent to 4.61 euros.
Spain’s two-year yield rose 16 basis points to 6.05 percent after reaching 6.12 percent, the first time it has exceeded 6 percent in the euro era. Belgian two-year rates jumped 13 basis points to 5.17 percent, and Irish yields climbed three basis points to 9.90 percent.
“The crisis is no longer about an individual country’s debt issues. It’s about confidence in the euro itself,” said Frank Velling, chief strategist at BankInvest Asset Management A/S in Copenhagen, which manages $17 billion.
The cost of insuring against default on European financial-company debt rose to a record, according to traders of credit-default swaps.
The Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers increased to 354 and the subordinated gauge gained six basis points to 601, according to JPMorgan Chase & Co. An increase signals worsening perceptions of credit quality.
The European Financial Stability Facility may fail to raise enough funds to increase its capacity to more than 1 trillion euros as planned because of a deterioration in market conditions over the past month, the Financial Times reported, citing three unnamed senior euro-area officials.
European Central Bank Executive Board member Jose Manuel Gonzalez-Paramo said euro-area politicians should not rely on the ECB.
“Governments cannot expect the ECB to finance public deficits,” Gonzalez-Paramo said in a speech in Oxford, England yesterday. “It is now a time for politicians to be bold and courageous” and “complete as soon as possible the great project begun 60 years ago towards ever closer union,” he said.
A gauge of oil companies led the rebound in the Stoxx 600 as oil advanced in New York. Royal Dutch Shell, Europe’s biggest oil company, rose 1.5 percent to 2,101 pence. Total, the region’s largest refiner by capacity, increased 2.4 percent to 35.69 euros. Statoil ASA, Norway’s national oil company, climbed 1.9 percent to 139.20 kroner.
Axa jumped 1.7 percent to 8.85 euros after Goldman Sachs upgraded the shares to “conviction buy” from “neutral.”
Blacks Leisure dropped 11 percent to 3.88 pence, after slumping as much as 63 percent, its lowest price since August 1989. The outdoor-clothing retailer said full-year profits will trail its forecast as lower consumer spending continued to pressure on the outdoor clothing group.
The owner of the Blacks and Millets brands, which more than doubled pretax losses in the six months to August 27, said it continued to seek additional funding and other financing options to execute a turnaround plan. Analysts said they see “little equity value left” in the company.
Nokian Renkaat Oyj, the Nordic region’s biggest tiremaker, lost 3.3 percent to 21.16 euros after saying its heavy tires unit will reduce production to reflect weaker demand.
Nokian Renkaat will reduce shifts, cutting the work of about 100 employees through temporary layoffs and potential job cuts, the Nokia, Finland-based company said in a statement today. The measures will continue indefinitely, it said.
Vedanta Resources Plc, the largest copper miner in India, dropped 2.8 percent to 928 pence. Copper headed for its fourth weekly drop on the London Metal Exchange.
Thomas Cook Group Plc rallied 10 percent to 18.02 pence, extending the gains from the past two days to 67 percent. The Daily Telegraph reported the tour operator’s lenders, a syndicate of 17 banks, are close to extending a 100 million-pound ($155 million) loan to it.
The shares sank 75 percent on Nov. 22 after a collapse in bookings caused the tour operator to hold new talks with banks and delay its full-year results.