European Stocks Have Biggest Weekly Gain Since July; Yell, C&W, Weir Climb

European stocks posted the biggest weekly gain since July as reports from the U.S. and China reassured investors that the economic recovery is not faltering and takeover speculation increased.

Rio Tinto Group and Xstrata Plc led an advance in basic- resource shares as manufacturing in China grew at a faster pace in August. Daimler AG rose 8.5 percent as Mercedes-Benz sales advanced in August. Yell Group Plc soared 13 percent as investors speculated that one or more companies are preparing a takeover bid for the company.

The Stoxx Europe 600 Index climbed 3.7 percent this week after reports showed accelerating growth in U.S. and Chinese manufacturing and the number of Americans hired by companies increased. The measure is still 4.3 percent below this year’s high in April.

“We’ve had very encouraging economic data this week,” said Matthias Jasper, head of equities at WGZ Bank AG in Dusseldorf, Germany. “People have been too negative and we’re going to see higher prices on equity markets in the coming weeks.”

National benchmark indexes climbed in all but one of the 18 western European markets. France’s CAC 40 Index advanced 4.7 percent while Germany’s DAX Index rose 3.1 percent and the U.K.’s FTSE 100 Index soared 5.3 percent. All industry groups in the Stoxx 600 rose this week.

The VStoxx Index, which measures the cost of protecting against declines in the Euro Stoxx 50 Index, dropped 13 percent this week, the biggest weekly decline since July.

U.S. Payrolls Rise

U.S. payrolls that exclude government agencies climbed 67,000 in August, after a revised 107,000 increase in July that was more than initially estimated, Labor Department figures showed.

The Institute for Supply Management’s gauge of U.S. manufacturing unexpectedly increased to 56.3 in August from 55.5 a month earlier. China’s purchasing managers’ index rose to 51.7 from 51.2, according to a government-backed report, signaling that the economy’s slowdown is stabilizing. A separate Chinese PMI released by HSBC Holdings Plc and Markit Economics climbed to 51.9 from 49.4.

Rio Tinto, the world’s second-biggest iron ore supplier, climbed 9.7, while Xstrata, the largest exporter of coal used in power plants, rallied 8.4 percent. European basic-resource shares rose 6.8 percent this week, the best performance among 19 industry groups in the Stoxx Europe 600 Index.

Daimler, Continental Climb

Daimler surged 8.5 percent, the stock’s biggest weekly gain since May. The world’s second-biggest manufacturer of luxury cars said sales at its Mercedes-Benz unit jumped 22 percent in August as its E-Class and S-Class models found buyers in China, Germany and the U.S.

Continental AG jumped 8.8 percent, the shares’ biggest weekly advance since June. Europe’s second-largest auto parts supplier, raised 1 billion euros ($1.3 billion) in the region’s first junk bond, or high-yield note, sale in a month.

The stock was rated “buy” in reinstated coverage at Commerzbank AG, which said “the announced bond issue should provide comfort, lead to a rerating and offset uncertainty about the company’s future structure.”

A measure of European automobile and automobile part shares climbed 6.4 percent this week, the second-best performance among 19 industry groups in the Stoxx 600 Index.

Yell, Cable & Wireless Soar

Yell, the publisher of the U.K.’s Yellow Pages directories, jumped 13 percent, the stock’s biggest weekly gain since April. “M&A activity continues to fill the air,” David Buik, a London-based market strategist at BGC Partners, wrote in an e- mail. “Interested parties are suggesting that Yell might be for sale at around 30 pence” a share, he said. Yell spokesman Jon Salmon said via the phone that the company doesn’t comment on market speculation.

Cable & Wireless Worldwide Plc, which provides telecommunications services to customers including National Grid Plc, surged 10 percent on speculation that AT&T Inc. or one of its rivals may bid for the company. “The rumor is driving the share price,” said Tom Gidley-Kitchin, an analyst at Charles Stanley Group Plc in London.

Orkla ASA, whose products range from frozen pizzas to chemicals, rose 10 percent in Oslo after a report said that Korea-based Posco, the world’s third-biggest steelmaker, wants to buy its Elkem ASA subsidiary. The report cited Posco’s Chief Executive Officer Chung Joon Yang.

Weir Group Plc climbed 13 percent after saying it agreed to buy the valves business of BDK Engineering Industries Ltd. The business generated sales of 20.9 million pounds ($32.3 million) in the year through March, Weir said.