European stocks advanced in the past week, rebounding from the previous week’s selloff, as a drop in the cost of borrowing between lenders and higher metal prices sparked a rally in banks and mining companies.
Deutsche Bank AG and Unicredit SpA rose more than 14 percent as the London interbank offered rate, or LIBOR, had its biggest weekly drop this year. Bank of Ireland PLC soared 44 percent after the Dublin-based lender announced plans to buy back debt to boost capital. Vedanta Resources PLC, Lonmin PLC and Anglo American PLC jumped more than 10 percent.
The Dow Jones STOXX 600 Index gained 2 percent to 207.01 last week.
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The measure has jumped 31 percent since March 9 on speculation the worst of the recession is over and the recovery is likely to continue, according to Goldman Sachs Group Inc strategists.
“Banks again this week got a boost every time the words ‘green shoots’ were mentioned,” said David Morrison, a London-based market strategist at GFT. “Miners also got a lift from hopes that recovery is around the corner.”
A Merrill Lynch & Co survey this week showed investors continued to pile back into equities this month as optimism on economic growth and corporate earnings surged to the highest levels in at least four years.
National benchmark indexes rose in all 18 western European markets. France’s CAC 40 added 1.9 percent, while Germany’s DAX increased 3.8 percent. The UK’s FTSE 100 gained 0.4 percent. UK gains were limited after Standard & Poor’s rating service downgraded the country’s credit outlook.
The VSTOXX Index, which gauges the cost of insurance against declines on the Dow Jones Euro STOXX 50 Index, closed on Wednesday at its lowest since Lehman Brothers Holdings Inc filed for bankruptcy in September. The measure ended 2 percent lower on the week.
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