By Adam Haigh
Sept. 18 (Bloomberg) -- European stocks advanced for the first time this week after the world's largest central banks said they will pump $247 billion into the financial system in a coordinated effort.
HBOS Plc rallied 34 percent as Lloyds TSB Group Plc agreed to acquire the U.K.'s biggest mortgage lender. UBS AG and Societe Generale SA rose more than 3 percent after the Federal Reserve almost quadrupled the amount of dollars that central banks can auction around the world. Volkswagen AG increased 18 percent on speculation that Porsche SE will make a full takeover for Europe's largest carmaker.
Europe's Dow Jones Stoxx 600 Index added 0.8 percent to 259.98 at 2:30 p.m. in London, rebounding from its steepest three-day slide since 2002. The index is down 7.4 percent this week after Lehman Brothers Holdings Inc. filed for bankruptcy and the government had to take over American International Group Inc.
``The central banks are aware of the problems, which is good, and they are being as proactive as they possibly can,'' Julian Chillingworth, who oversees about $2.5 billion as chief investment officer at Rathbone Unit Trust Management, said in an interview on Bloomberg Television. ``You could see the market have a knee-jerk reaction. It is positive, but it also underlines the level of the problem.''
More than $19 trillion has been wiped off global stock- market value since Oct. 31 as the worst U.S. housing recession since the Great Depression and more than $500 billion in credit losses and writedowns at banks slowed the world economy.
National Markets
National benchmark indexes rose in 14 of the 18 western European markets. The U.K.'s FTSE 100 added 0.8 percent, Germany's DAX climbed 1 percent, and France's CAC 40 increased 1.2 percent.
A report today showed retail sales in the U.K. rose 1.2 percent in August. Economists had forecast a 0.5 percent drop, according to the median in a Bloomberg News survey. Kingfisher Plc led retailers higher, climbing 9 percent.
The Fed increased the amount of dollars that the European Central Bank, the Bank of Japan and other counterparts can offer from $67 billion ``to address the continued elevated pressures in U.S. dollar short-term funding markets.'' The Bank of England, the Bank of Canada and the Swiss National Bank also participated.
HBOS soared 34 percent to 197.4 pence. Lloyds, the bank that considered buying Northern Rock Plc, agreed to acquire HBOS for 232 pence a share, or about 12.2 billion pounds ($22.2 billion), to create a company that controls more than a quarter of the U.K. mortgage market. Lloyds shares slipped 8 percent to 257.5 pence.
`Unraveling'
``We are finally getting to see the unraveling of the casualties,'' said Mike Lenhoff, who helps oversee about $36.4 billion as chief strategist at Brewin Dolphin Securities Ltd. in London. ``We have reached the point which could hopefully be the final phase of this,'' he said in a Bloomberg Television interview.
UBS, Switzerland's biggest bank, added 5.2 percent to 16.52 francs. Societe Generale, France's third-largest bank by assets, rose 3.4 percent to 56.20 euros.
The cost of borrowing in dollars overnight declined. The London interbank offered rate, or Libor, fell 1.19 percentage points to 3.84 percent today, according to the British Bankers' Association. It was at 2.15 percent last week.
The cost of protecting European corporate bonds from default dropped today, according to traders of credit-default swaps.
Volkswagen advanced 18 percent to 282.50 euros, climbing for a third straight day.
Kingfisher Profit
``The current share-price development shows that the market believes in a full takeover,'' Frankfurt-based Commerzbank AG analyst Gregor Claussen wrote to investors today. ``A further increase to above 50 percent is likely to happen around October/November.'' Claussen recommends selling the stock.
Kingfisher rose 10 percent to 132.1 pence. Less discounts helped first-half profit at Europe's biggest home-improvement retailer to top analysts' estimates even as U.K., Irish and Spanish house prices declined.
Hays Plc, Britain's largest recruitment company, gained 10 percent to 84.5 pence after Royal Bank of Scotland Group Plc upgraded the shares to ``buy'' from ``hold,'' saying the current price is already discounting a global recession.
Ryanair Holdings Plc rallied 6.3 percent to 2.72 euros. Europe's biggest discount carrier said it will break even this fiscal year following the recent decline in oil prices.
Pernod-Ricard SA, the world's second-largest liquor maker, declined 5.5 percent to 58.61 euros after reporting the smallest profit increase in three years and saying weaker economies will hamper growth.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
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