European stocks rose the most in six months this week, as investors speculated that Japan will prevent further radiation leaks from its stricken nuclear plant and the U.S. economy grew at a faster-than-forecast pace. Deutsche Telekom AG soared 12 percent as AT&T Inc. agreed to buy T-Mobile USA Inc. Cie. de Saint-Gobain, Europe’s biggest provider of building materials, neared its highest price since June 2008. Rio Tinto Plc (RIO) gained 5.7 percent after copper rose and it secured a tax concession from the Australian government. The benchmark Stoxx Europe 600 Index gained 3.1 percent this past week for the biggest advance since September. The gauge had declined for four consecutive weeks amid concern that revolts in the Middle East and North Africa will further disrupt oil supplies and after Japan suffered its strongest earthquake on record. The gauge has recouped 5.3 percent since this year’s low on March 16. “The impact on financial markets of the natural catastrophe in Japan was not as dramatic as people feared and valuations are currently too attractive for investors to ignore,” said Kai Fachinger, who manages a 600 million euro ($849 million) fund for SAM Sustainable Asset Management AG in Zurich. “Still, Portugal’s debt problem is an issue that will return to haunt markets.” The Stoxx 600 Index is trading at about 13.5 times its companies’ reported earnings, near the gauge’s cheapest multiple since 2009, according to data compiled by Bloomberg. Japan’s Earthquake In Japan, the government estimated the damage from the earthquake and tsunami on March 11 at as much as 25 trillion yen ($308 billion). Tokyo authorities said babies should avoid drinking tap water after finding traces of iodine, boosting shares of bottled water suppliers including Vevey, Switzerland- based Nestle SA, which rose 4.9 percent this week. Billionaire investor Warren Buffett said the earthquake is a buying opportunity and he won’t sell his Japanese shares as the tremor hasn’t changed the nation’s future. European stocks rebounded as the U.S., the U.K. and France imposed a no-fly zone over Libya, sending aircraft to strike Muammar Qaddafi’s ground forces. Coalition forces have mounted successive attacks against the armored units that loyal to the country’s ruler of the last 41 years. The three countries intervened to prevent Qaddafi’s troops from entering Benghazi, the center of the rebellion. Stocks extended their gains as Portugal’s Prime Minister Jose Socrates offered to resign after parliament rejected his package of cuts to government spending. Investors speculated that Socrates’s defeat will force the country to ask the European Union for a bailout. Two European officials with direct knowledge of the matter said Portugal may need as much as 70 billion euros ($99 billion). U.S. Economic Growth The U.S. economy grew at a 3.1 percent annual rate in the fourth quarter, led by a jump in consumer spending that will be hard to sustain after energy prices surged early this year. The revised increase in gross domestic product compares with a 2.8 percent estimate last month, figures from the Commerce Department showed. In Germany, business confidence fell less than economists had predicted from a record high in March. The Munich-based Ifo institute said its business-climate index, based on a survey of 7,000 executives, declined to 111.1 from 111.3 in February, which was the highest reading since records for a reunified Germany began in 1991. Economists had predicted a drop to 110.5, according to the median of 39 forecasts in a Bloomberg News survey. Deutsche Telekom, Vodafone Deutsche Telekom soared 12 percent, the biggest gain since 2008 after AT&T agreed to buy T-Mobile USA to create America’s largest mobile-phone company, trumping Sprint Nextel Corp.’s effort to acquire the business. Vodafone Plc, the world’s largest mobile-phone operator, climbed 3.9 percent. The AT&T deal cuts the number of mobile phone operators in the U.S., benefiting Vodafone’s joint venture with Verizon Communications Inc., according to analysts including Robin Bienenstock at Sanford C. Bernstein & Co. AT&T’s acquisition helped a gauge of Stoxx 600 telecommunications companies rally 3.7 percent this week. Construction and building-materials manufacturers rose the most out of 19 industry groups in the benchmark measure, following gains in Asia, as investors speculated that demand will increase as Japan rebuilds. Saint Gobain gained 6.8 percent, taking the stock close to its highest price since June 2008. CRH Plc surged 6.2 percent. U.K. homebuilder Barratt Developments Plc advanced 9.4 percent after the U.K. government announced measures to help first-time homebuyers get cheaper mortgages. Carmakers Rally A group of European carmakers surged 4.5 percent, led by Fiat SpA. The Turin, Italy-based company gained 8.6 percent. Pirelli & C. SpA, Europe’s third-largest maker of tires, rallied 5.4 percent this past week and raised its revenue target for 2011 to more than 5.5 billion euros. Cap Gemini SA, Europe’s largest computer-services company, rose 7.6 percent and SAP jumped 5.5 percent as technology companies were amongst the three furthest advancing industry groups in the Stoxx 600. Accenture, the world’s second-largest technology-consulting company, gave a sales forecast for this quarter that exceeded analysts’ estimates and Oracle predicted that fourth-quarter profit will top analysts’ estimates. Rio Tinto, the world’s third-largest miner, advanced 5.7 percent. London-based Rio and larger competitor BHP Billiton Ltd. secured their second tax concession in Australia after the government agreed to allow them to credit future state royalties imposts against a planned 30 percent levy on their profits. Xstrata Plc, the world’s largest exporter of thermal coal, gained 3.8 percent. Swatch, Drax Gain Swatch Group AG, the world’s largest watchmaker, surged 7 percent. Exports of timepieces rose 17.8 percent in February, the Swiss Federal Customs Office in Bern said. The annual Baselworld watch fair opened in Switzerland on Thursday. Drax Group slumped 7.8 percent as U.K. Chancellor of the Exchequer George Osborne said generators will have to pay a new charge on carbon-dioxide emissions. The Treasury set its floor at 16 pounds a ton, rising to 30 pounds by 2020, after consulting with utilities, according to a Treasury spokesman who declined to be named, citing government policy. The government may raise its carbon tax to ensure a premium over European Union emissions permits, according to a report from Citigroup Inc. Cable & Wireless Declines Cable & Wireless Worldwide Plc tumbled 12 percent, the biggest weekly decline since July, after the telecommunications company said that the financial year’s gross margins in its legacy voice business will decline more than it had predicted. ITV Plc sank 7.4 percent. Jefferies Group Inc. downgraded the U.K. broadcaster to “underperform” from “hold,” citing “dire” consumer confidence numbers plus potential margin squeeze from commodity price inflation in the retail sector. Parmalat SpA dropped 8.5 percent after Italy’s government described the parmesan-cheese maker as “strategic.” Laval, France-based Groupe Lactalis had said it would buy out a group of Parmalat shareholders. To contact the reporter on this story: Giles Broom in Zurich at gbroom@bloomberg.net To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

Source