European stocks rose for a third week as the US Federal Reserve said it would act as needed to support the economic recovery reports and a successful government bond sale in Spain boosted investors’ confidence.
Continental AG posted the biggest weekly gain in five months after raising its sales-growth forecast for this year to more than 10 percent. Banco Santander SA led European banking shares higher, rising 14 percent. BP PLC declined 9.6 percent as the US government stepped up pressure on the company to clear up its Gulf of Mexico oil spill.
The STOXX Europe 600 Index rose 2 percent to 249.46, extending last week’s 0.2 percent increase. The measure has still fallen 8.3 percent from this year’s high on April 15 as investors speculated that efforts to contain Europe’s debt crisis would choke off the economic recovery. The decline has left the measure trading at less than 15 times the reported earnings of its companies, near the cheapest valuation since 2008, Bloomberg data shows.
“Investors are confident when money is put on the table and that’s what happened this week with the debt auction in Spain,” said Alan Lancz, president of Alan B. Lancz & Associates Inc and director of research at LanczGlobal.com. “We’re not out of the woods yet, but European investors are getting some confidence back.”
Spain sold 3.9 billion euros (US$4.7 billion) of a 2013 note on Thursday, with demand increasing as yields driven higher by the region’s debt crisis lured buyers. Investors bid to take up 2.1 times the amount of the securities on offer. That compared with a bid-to-cover ratio of 1.8 when three-year notes were sold in April.
The Spanish benchmark IBEX 35 advanced 7.2 percent, its biggest weekly gain since July last year, as the EU said Spain is implementing the “necessary measures” to rein in its budget deficit.
National benchmark indexes advanced in all of the 18 western European markets except Greece. The UK’s FTSE rose 0.7 percent. Germany’s DAX surged 1.8 percent while France’s CAC 40 jumped 2.9 percent.
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