European Stocks Rise; HBOS, Northern Rock, Porsche Pace Gains

Sept. 26 (Bloomberg) -- European stocks advanced, led by banks and exporters on speculation the U.S. Federal Reserve will cut interest rates to sustain growth in the world's biggest economy.

HBOS Plc climbed after Goldman, Sachs & Co. recommended investors buy shares of the biggest U.K. mortgage lender. Northern Rock Plc rose after the bank said it is in takeover discussions. Porsche AG and ASML Holding NV paced gains by companies dependent on the U.S. for revenue.

The Dow Jones Stoxx 600 Index added 0.7 percent to 375.03. The Stoxx 50 rose 0.5 percent, while the Euro Stoxx 50, a measure for the euro region, gained 0.8 percent. Financial companies are the worst-performing stocks in the Stoxx 600 this year.

``After some declines there are a lot of opportunities to add to holdings,'' said Paul Mumford of Cavendish Asset Management in London, which oversees $1.4 billion. ``At some stage, people will see there is better value in the equity market.''

The odds the Fed will lower rates by 0.25 percentage point next month are 88 percent, futures contracts show. Futures are also pricing in a 76 percent chance of another quarter-percentage point cut in December.

``There is continued wishful thinking from some traders, who are betting the U.S. Fed will cut rates again this year, this time by a quarter point,'' Oliver Stevens, head of dealing at IG Markets Ltd. in Melbourne, wrote in a note.

`Winners and Losers'

National benchmarks advanced in all the 18 western European markets except Austria. The U.K.'s FTSE 100 gained 0.6 percent. France's CAC 40 added 0.9 percent. Germany's DAX climbed 0.5 percent.

HBOS gained 5.1 percent to 873 pence. Goldman Sachs added the shares to its ``conviction buy'' list on speculation the bank will outperform rivals following the bailout of mortgage lender Northern Rock.

``It is time to start to differentiate between winners and losers, post the woes of Northern Rock,'' Goldman wrote in a research note dated today, upgrading the shares from ``neutral.''

Northern Rock jumped 12 percent to 182 pence. The company said in a statement yesterday after the market closed that it has received several approaches. The talks are at a ``preliminary'' stage and no price has been proposed, the Newcastle-based company said. It abandoned plans to pay a first-half dividend next month.

U.K. commercial banks shunned the Bank of England's emergency auction of three-month loans. Financial institutions made no bids for the 10 billion pounds ($20 billion) that the central bank offered to ease strains in the money market, the Bank of England said.

Porsche, Nokia

Alliance & Leicester Plc, Britain's seventh-biggest bank, gained 3.4 percent to 733 pence. Bradford & Bingley Plc, its biggest lender to landlords, jumped 4.4 percent to 291.25 pence.

Porsche, the maker of the 911 Carrera and Boxster sports cars, added 1.9 percent to 1,476.55 euros. The automaker makes 35 percent of its sales in the U.S. Bayerische Motoren Werke AG, the world's biggest luxury carmaker, climbed 3.1 percent to 46.68 euros. The carmaker makes a quarter of its sales in the U.S.

ASML, the region's largest maker of semiconductor equipment, advanced 1 percent to 23.35 euros. The U.S. accounts for about a quarter of the company's sales.

Nokia Oyj, the world's biggest handset maker, added 2.4 percent to 26.63 euros. Citigroup Inc. raised its price forecast for the shares by 15 percent to 31 euros.

Utilities Shares

Orders in Asia support our ``above-consensus market share assumptions for Nokia,'' London-based analyst Sherief Bakr wrote in a note to clients. The brokerage increased its forecast for the number of handsets phone companies are likely to sell worldwide.

An index for utilities in the Stoxx 600 gained 1.5 percent after JPMorgan Chase & Co. increased its share-price forecasts for E.ON AG, RWE AG and Fortum Oyj.

E.ON, Germany's biggest utility, climbed 1.3 percent to 129.48 euros. RWE, the country's second biggest, added 1.7 percent to 88.21 euros. Fortum, Finland's largest utility, increased 1.6 percent to 25.85 euros.

Hennes & Mauritz AB, Europe's second-biggest clothes retailer, gained 3.1 percent to 402.5 kronor. The company said third-quarter net income rose 25 percent to 3.17 billion kronor ($490 million). That compares with the 3.14 billion-kronor median estimate of analysts in a Bloomberg survey.

Iberia Climbs

Etablissements Maurel & Prom SA slipped 2 percent to 15.38 euros. The French oil explorer said higher costs of exploration cut first-half operating income by half.

Iberia Lineas Aereas de Espana SA, Spain's biggest airline, climbed 4.9 percent to 3.41 euros after the newspaper Expansion reported that Air France-KLM Group and Spanish partners are preparing a takeover offer.

TUI Travel Plc gained 3.8 percent to 235 pence. The company formed when TUI AG's tourism unit and First Choice Holidays Plc merged said annual profit will meet its forecasts after more U.K. customers booked long-haul trips this summer.

Kesa Electricals Plc tumbled 5.5 percent to 261 pence. Europe's third-largest electronics retailer said first-half profit dropped 13 percent on costs to expand outside the U.K and refurbish stores.

DSG International Plc lost 3.7 percent to 129.9 pence. Europe's second-largest electronics retailer fell the most in eight months after Credit Suisse Group cut its price estimate for the stock to 95 pence from 155, citing potential product- guarantee restrictions.