European stocks had their biggest weekly advance in a year as UBS AG’s plan to replenish its capital fueled speculation financial companies will weather credit-market losses.
UBS, the region’s largest bank by assets, rallied the most in more than six years after saying it seeks to raise 15 billion Swiss francs (US$14.9 billion) in a rights offer. Credit Suisse Group and UniCredit SpA also paced gains by financial shares. Infineon Technologies AG, Europe’s second-biggest semiconductor maker, led technology stocks higher after Elpida Memory Inc of Japan said it would raise chip prices.
The Dow Jones STOXX 600 Index jumped 4.1 percent to 319.15. The gauge has fallen 12 percent this year on concern the collapse of subprime mortgages and a slowdown in the world’s largest economy will hurt global profit growth. More than US$2.8 trillion in value was erased from global equities in the first quarter.
“We’re at a crossroads after a very difficult start to the year,” said Philippe de Cholet, vice president of Cholet Dupont Gestion SA, which oversees US$3.1 billion in Paris. “A number of elements lead us to think that the worst may be behind us.”
Plans by UBS and Lehman Brothers Holdings Inc to raise capital have fueled speculation banks will recover from US$232 billion in mortgage-related losses. US Federal Reserve Chairman Ben Bernanke said this past week that he doesn’t expect the central bank will have to rescue another Wall Street firm.
Indexes paired some gains after a report on Friday showed the US lost jobs for a third consecutive month last month and the unemployment rate rose to the highest level since September 2005.
National benchmarks climbed in all 18 western European markets. Germany’s DAX Index added 3.1 percent. France’s CAC 40 gained 4.4 percent. The UK’s FTSE 100 advanced 4.5 percent. The STOXX 50 rallied 5 percent, and the Euro STOXX 50, a measure for the euro region, increased 4.2 percent.
Shares in the STOXX 600 are valued at an average 12.1 times estimated earnings, near the lowest since at least January 2002.
“It seems as if the market has integrated the darkest of scenarios,” said David Ganozzi, managing director at Fidelity Gestion in Paris, which oversees US$4.7 billion. “Potential for further declines is limited. It would be dangerous to be underweight stocks considering the low valuations.”
UBS surged 15 percent, the biggest weekly gain since September 2001. The bank, battered by the biggest writedowns from the collapse of the subprime mortgage market, reported US$19 billion of writedowns for the first quarter, bringing the total to almost US$38 billion since the third quarter of last year.
“Worries about solvability were lifted,” said Benoit de Broissia, an analyst at Richelieu Finance in Paris, which oversees US$6.3 billion. “This helped stocks to rebound.”
Credit Suisse, Switzerland’s second-largest bank, added 11 percent. UniCredit, Italy’s biggest, rose 10 percent.
Commerzbank AG, Germany’s second-largest bank, surged 9.6 percent. The bank said at a conference on Wednesday that it was “well positioned” to ride out the global financial crisis.
A measure for technology shares in the STOXX 600 had its steepest weekly gain this year, adding 6.3 percent.
Infineon climbed 12 percent. STMicroelectronics NV, the region’s largest chipmaker, increased 10 percent. ASML Holding NV, Europe’s biggest maker of semiconductor equipment, advanced 9.2 percent.
Elpida, Japan’s largest memory-chip maker, plans to increase chip prices by 20 percent this month after demand rose and inventory levels fell, chief executive Yukio Sakamoto said in a Bloomberg Television interview broadcast last Sunday.
AstraZeneca Plc jumped 14 percent. JPMorgan Chase & Co lifted its recommendation on shares of the UK’s No. 2 drugmaker on Tuesday to “neutral” from “underweight,” citing prospects of higher sales of the Crestor cholesterol pill.
Seat Pagine Gialle SpA surged 16 percent. Italy’s biggest phone-directory publisher on Wednesday rose the most since it started trading in August 2003 on speculation that its access to credit will improve.
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