European Stocks Post Biggest Weekly Gain Since 1987; BHP Soars

By Sarah Jones

Nov. 29 (Bloomberg) -- European stocks had their best week since January 1987, led by commodity producers and financial companies, as investors speculated efforts by governments worldwide will help shore up the economy and stabilize markets.

BHP Billiton Ltd. climbed by almost half in value after the world’s largest mining company withdrew its $66 billion hostile takeover for Rio Tinto Group on Nov. 25. Royal Dutch Shell Plc and Total SA rallied more than 10 percent as crude oil posted its first weekly advance in a month. Allianz AV and Deutsche Bank AG surged more than 30 percent, leading gains among banks and insurers.

The Dow Jones Stoxx 600 Index rallied 13 percent, the steepest weekly advance since January 1987, paring the benchmark’s drop this month to 7.1 percent. Stocks worldwide rose after China cut interest rates, the U.S. government guaranteed $306 billion of troubled Citigroup Inc. assets, and Democratic lawmakers pledged a stimulus package for the world’s largest economy.

“What we are getting is a huge collective response from policy makers,” said Mike Lenhoff, who helps oversee about $36.4 billion as chief strategist at Brewin Dolphin Securities Ltd. in London. “This has got to provide some degree of confidence.”

National benchmark indexes rose in all 18 western European markets. Germany’s DAX Index, France’s CAC 40 and the U.K.’s FTSE 100 all rallied 13 percent.

Monthly Drop

Even so, the Stoxx 600 is still down 7.1 percent in November as concern deepened that a worsening economy is stifling profits. Analysts have slashed earnings estimates this year as the credit turmoil spread. Profit for companies in the Stoxx 600 will slide 12 percent on average in 2008, compared with 11 percent growth forecast at the start of the year, according to data compiled by Bloomberg.

BHP shares soared 49 percent after the company abandoned its yearlong pursuit of Rio Tinto, blaming the rout in commodity prices and the credit-market squeeze for derailing the offer. Rio Tinto dropped 23 percent.

Shell led energy companies higher as crude oil advanced 3.1 percent to $51.46 a barrel, climbing for the first week in four.

Europe’s largest oil company jumped 19 percent, while Total, the region’s third-largest, gained 12 percent.

Allianz, Europe’s largest insurer and owner of Dresdner Bank, climbed 40 percent. Commerzbank AG, Germany’s second- biggest lender, said it will accelerate its takeover of Dresdner by as much as a year in a revised deal valued at 5.1 billion euros ($6.6 billion).

Deutsche Bank

Deutsche Bank rallied 49 percent, while Commerzbank increased 33 percent.

Irish Life & Permanent Plc, the country’s largest mortgage lender, soared 53 percent in Dublin trading after the Irish Association of Investment Managers, whose 12 members manage about 260 billion euros, proposed jointly investing with the government in the nation’s biggest banks.

Bank of Ireland Plc, the country’s biggest bank by assets, increased 15 percent, while Allied Irish Banks Plc rose 26 percent.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.