European Stocks Advance, Led by BHP, Infineon; Yara Climbs

By Sarah Thompson

Aug. 20 (Bloomberg) -- European stocks rose for the first time in three days as mining shares near their cheapest in seven months lured investors and Hewlett-Packard Co.'s earnings spurred gains by chipmakers.

BHP Billiton Ltd., the world's biggest mining company, and Rio Tinto Group climbed at least 7 percent. Infineon Technologies AG, Germany's largest semiconductor maker, rose 2.1 percent after Hewlett-Packard reported profit that topped analysts' estimates. Yara International ASA led chemical makers higher, adding 3.9 percent, following Israel Chemicals Ltd.'s more than fivefold surge in profit.

Europe's Dow Jones Stoxx 600 Index advanced 0.4 percent to 280.95 as of 4:30 p.m. in London. The measure for mining shares, the world's worst-performing equities in the past month following declines in commodity prices, climbed the most in three weeks today.

``For the long-term, you clearly have to play raw-material stocks,'' Franz Wenzel, who helps oversee about $830 billion as deputy director for investment strategy at Axa Investment Managers in Paris, said in a Bloomberg Television interview. ``Growth in emerging markets will support them. You have to search for an entry point.''

National benchmark indexes advanced in 11 of the 18 western European markets. Germany's DAX added 0.7 percent. The U.K. FTSE 100 gained 1.1 percent, and France's CAC 40 rose 0.8 percent.

BHP, Rio Tinto

BHP Billiton, which reported record earnings this week, rallied 7.3 percent to 1,631 pence. Rio Tinto, the world's third-largest mining company, gained 7.4 percent to 4,985 pence.

Copper for delivery in three months climbed $221, or 3 percent, to $7,563 a ton yesterday in London amid speculation that prices had fallen too far, given limited supplies of the metal. It traded down $46 today.

The Stoxx 600 Basic Resource Index has dropped as much as 30 percent from this year's peak in May, leaving shares in the measure yesterday trading at the cheapest since January relative to earnings, according to data compiled by Bloomberg.

Commodity producers ``are still generating very good profitability,'' said Jane Coffey, head of equities at Royal London Asset Management, which oversees about $63 billion. ``The demand side is weakening but the supply side is constrained, so there is a limit to how far these could come back.''

Infineon, Yara

Infineon climbed 2.1 percent to 5.68 euros. STMicroelectronics NV, Europe's biggest chipmaker, rose 2.6 percent to 8.315 euros.

Hewlett-Packard, the world's largest personal-computer maker, said demand for notebooks and orders in Europe and Asia spurred a 14 percent jump in third-quarter profit and a 10 percent gain in sales.

Hewlett-Packard's earnings forecast for the current period also topped projections.

Yara, the world's largest fertilizer maker, climbed 3.9 percent to 320 Norwegian kroner, while K+S AG, Europe's largest producer of potash used in fertilizers, jumped 7 percent to 78.78 euros.

Israel Chemicals, which harvests minerals from the Dead Sea to make fertilizers and chemicals, said second-quarter profit rose more than fivefold on soaring potash prices.

Tullow Oil Plc rallied 6.8 percent to 741.5 pence. The U.K. explorer with the most exploration licenses in Africa was upgraded to ``buy'' from ``neutral'' at UBS AG because of future drilling potential and the possibility of takeover bids.

To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net