European stocks climbed, completing their biggest weekly rally in three months, on speculation that the Federal Reserve will opt for further stimulus after a report showed US employers hired fewer workers than estimated.

Banks contributed the most to the Stoxx Europe 600 Index’s advance as Deutsche Bank AG and Barclays Plc each climbed more than 5 per cent. Xstrata Plc jumped 3.6 per cent after Glencore International Plc increased its offer for the mining company led by Mick Davis. Solvay SA climbed 3.3 per cent after NYSE Euronext said it will join France’s CAC 40 Index.

The Stoxx 600 advanced 0.2 per cent to 272.3 at the close, after earlier rising as much as 0.8 per cent. The gauge has gained 2.3 per cent this week as European Central Bank President Mario Draghi said yesterday that policy makers agreed on a plan to buy unlimited government debt.

“The Fed’s not going to be happy with the payrolls numbers and will probably look for a way to stimulate the economy,” said Mike Lenhoff, chief strategist at Brewin Dolphin Securities Ltd. in London, in a phone interview. “It’s a win-win for the markets: if the numbers were good, it would’ve meant the economy is improving. Now the numbers are bad, the Fed might do something about it. Markets are also rallying because of the positive developments in Europe.”

In the US, a Labor Department report showed that employers hired 96,000 workers in August, down from a revised 141,000 in July. Economists had forecast that the world’s largest economy added 130,000 workers last month.

US unemployment

The release also showed that the nation’s unemployment rate unexpectedly slipped to 8.1 per cent. Economists had predicted a jobless rate of 8.3 per cent, according to the median projection in a Bloomberg News survey. Unemployment has stayed above 8 per cent for the last 43 months.

The Stoxx 600 posted its biggest weekly gain since the beginning of June after Draghi said yesterday that the ECB has approved his bond-buying plan. The central bank will target government securities with maturities of one to three years, Draghi said. Purchases will be fully sterilized to ensure a neutral impact on money supply, and the ECB will not have seniority, he said.

The volume of shares changing hands on the Stoxx 600 today was double the average of the last 30 days, according to data compiled by Bloomberg.

The VStoxx Index, which measures the cost of option prices on the Euro Stoxx 50 Index, dropped for a third day, declining 5.6 per cent to 21.83. The gauge tumbled 16 per cent yesterday, its largest slide since October last year.

China infrastructure

China has approved plans to build 2,018 kilometers of roads, according to statements on the National Development and Reform Commission’s website. The state endorsed the projects in the June-August period. A Sept. 5 statement showed the government also gave the go ahead for plans to build subways in 18 Chinese cities, as it seeks to revive economic growth.

National benchmark indexes climbed in every western- European market except Denmark today. The U.K.’s FTSE 100 added 0.3 per cent, while Germany’s DAX advanced 0.7 per cent. France’s CAC 40 rose 0.3 per cent.

A gauge of banking shares advanced 2.1 per cent to its highest level in five months. Deutsche Bank and Barclays surged 5.3 per cent to 31.36 euros and 6.9 per cent to 206.4 pence, respectively.

Banks rally

Santander SA, Spain’s biggest lender, climbed 1.7 per cent to 6.08 euros, while BNP Paribas SA, France’s largest bank, added 1.7 per cent to 37.78 euros. Credit Agricole SA and Societe Generale SA jumped 6.5 per cent to 5.34 euros and 6.8 per cent to 24.49 euros, respectively.

Italy’s Banca Monte dei Paschi di Siena SpA surged 11 per cent to 26.4 euro cents, while Portugal’s Banco Espirito Santo SA soared 8 per cent to 66.2 cents.

Xstrata gained 3.6 per cent to 1,014 pence, while Glencore slumped 3.6 per cent to 378.1 pence. The commodities trader, which owns 34 per cent of Xstrata, offered 3.05 of its shares for every one that its target’s investors hold, according to a statement from Zug, Switzerland-based Xstrata. Glencore’s Chief Executive Officer, Ivan Glasenberg, will become CEO of the combined group. Under the previous offer, Xstrata’s Davis would have taken on the position.

Rio Tinto Group climbed 6.2 per cent to 3,021 pence for the biggest contribution to the Stoxx 600’s advance.

Solvay gained 3.3 per cent to 91.79 euros after NYSE Euronext said late yesterday that the maker of chemicals and plastics will replace PSA Peugeot Citroen in the CAC 40 from Sept. 24.

Meggitt Plc added 1.6 per cent to 407.3 pence after Citigroup Inc. raised its recommendation on the shares to buy from neutral. The brokerage said that other companies may find Meggitt an attractive takeover target.

Neopost SA slumped 8 per cent to 38.99 euros, its biggest drop since October 2007. The company late yesterday posted second-quarter sales of 260.7 million euros ($333 million), a 2.2 per cent decline from a year earlier based on constant exchange rates.


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