European Stocks End Five Weeks of Losses

- European stocks had the biggest weekly gain since June on speculation the fallout from a global credit rout will be limited.

Arcelor Mittal, the world's largest steelmaker, and BHP Billiton Ltd., the biggest mining company, led advances by companies sensitive to economic growth. Vestas Wind Systems A/S, the largest windmill maker, climbed the most in four years after saying profit surged on increasing demand for alternatives to fossil fuel.

``Economic data doesn't show yet that the financial crisis will have a negative impact on economic growth,'' said Carsten Klude, who helps manage $20 billion as head of investment strategies at M.M. Warburg & Co. in Hamburg.

The pan-European Dow Jones Stoxx 600 Index rose 2.9 percent to 370.52, extending gains on Aug. 24 after U.S. new home sales and durable goods orders topped economists' estimates. The benchmark has dropped 7.4 percent from a 6 1/2-year high reached June 1 on concern that defaults among U.S. borrowers with the poorest credit profiles will lead to higher financing costs.

The Stoxx 50 gained 2.1 percent and the Euro Stoxx 50, a measure for the euro region, climbed 2 percent.

National benchmarks advanced in all 18 western European markets. Germany's DAX increased 1.8 percent and France's CAC 40 rallied 3.8 percent. The U.K.'s FTSE 100 added 2.6 percent.

A Commerce Department report showed sales of new homes rose 2.8 percent in the U.S. to an annual pace of 870,000 in July. Economists forecast the figure would total 820,000 from a previously reported 834,000 pace in June. Durable goods orders advanced 5.9 percent last month.

`Strong Numbers'

``These are strong numbers and show that the credit crisis is still not having any significant effect on the economy,'' said Espen Furnes, who helps manage around $34 billion at Storebrand Asset Management in Oslo.

The Chicago Board Options Exchange Volatility Index has dropped 32 percent since Aug. 16, when it surged to the highest since October 2002. Investors' expectations for price swings in German stocks, as measured by the VDAX Index, have declined 21 percent from Aug. 16 when it reached its highest since June 2006.

Arcelor Mittal jumped 17 percent. Merrill Lynch raised its recommendation on the shares to ``buy'' from ``neutral,'' saying ``the global carbon steel environment is positive.''

BHP Billiton Ltd. added 12 percent. The world's biggest mining company reported an eighth consecutive record profit and said weakness in the U.S. housing market shows no sign of hurting commodity demand in Asia and Europe.

Metal Prices

Investors should add to holdings of European mining stocks, Lehman Brothers Holdings Inc., JPMorgan Cazenove Ltd. and HSBC Holdings Plc said this week.

The Dow Jones Stoxx Basic Resource Index rose 11 percent, the biggest advance since the week ended Sept. 28, 2001. Copper, nickel, aluminum and zinc were headed for their first weekly gain since July in London.

ThyssenKrupp AG, Germany's largest steelmaker, increased 5.8 percent and Salzgitter AG, the second-biggest, jumped 13 percent. Kloeckner & Co. AG rallied 16 percent. The steel trader said Aug. 22 that JPMorgan Asset Management Holdings Inc. raised its stake in the company to 5.05 percent.

Vestas soared 22 percent, the biggest weekly gain since August 2003. The company said second-quarter net income climbed to 51 million euros ($69 million) from 10 million euros a year earlier and reiterated a forecast for sales to rise about 17 percent this year as it boosts production capacity in China and the U.S., two of the company's biggest growth markets.

`Stocks Are Attractive'

``Stocks are attractive in the medium and in the long term,'' said Ulrike Pfuhl, a Frankfurt-based portfolio manager at JPMorgan Asset Management, which has $1.1 trillion under management. ``The fundamental data is positive.''

Deutsche Bank AG dropped 3.9 percent to the lowest since September 19, 2006. Goldman, Sachs & Co. cut its recommendation on the shares to ``neutral'' from ``buy'' and reduced its price estimate 21 percent to 108.1 euros apiece.

``We consider the medium-term outlook for a broad range of investment-banking activities and the group's earnings as highly uncertain and expect this to weigh on the stock's performance,'' London-based analysts including Christoffer Malmer wrote in a report dated Aug. 22.

Standard Chartered Plc dropped 4.2 percent on speculation the company may be understating its risk from Whistlejacket Capital Ltd., an $18 billion debt fund the U.K. lender manages. Spokesman Tim Baxter said Aug. 24 the London-based bank has ``limited'' risk from the fund.

Meinl European Land Ltd. plummeted 12 percent, the steepest decline in the Stoxx 600 this week. Austria's second-largest real-estate developer by market value unexpectedly said it bought back shares in the first half of the year, making additional repurchases less likely.