London :  European stocks posted a weekly gain as the Stoxx Europe 600 Index rebounded from an eight-month low on speculation the economy is strong enough to weather the region's government-debt crisis.

Basic-resources stocks led the gains, paced by BHP Billiton and Rio Tinto Group. Portugal Telecom SGPS jumped 14 per cent as Telefonica threatened to bid for the Portuguese company after it rejected an offer for its stake in their Brazilian joint venture. BP fell for a sixth straight week as efforts to halt an oil leak in the Gulf of Mexico continued.

The Stoxx Europe 600 Index rose 2.9 per cent to 244.01 this past week as all 19 industry groups advanced, recovering from a plunge to an eight-month low on May 25. The measure has slumped 6.1 per cent so far this month, on course for the biggest drop since February 2009, on concern that European nations will have difficulty taming their budget deficits without harming the economic recovery.

"We don't think we'll sink into another recession just like that," Hans Rademaker, a board member at Robeco Groep NV, which oversees about $170 billion (Dh624 billion), told reporters in Amsterdam Friday. "Temporary corrections of equity markets in between recessionary periods are pretty normal. A rise never happens in a straight line, you'll always have bumpy patches along the way."

Cheapest valuation

The 10 per cent decline since this year's high on April 15 has left the Stoxx 600 trading at less than 15 times the reported earnings of its companies, near the cheapest valuation since 2008, according to Bloomberg data.

National benchmark indexes rose in 16 of the 18 western European markets this week. Germany's DAX gained 2 per cent while France's CAC 40 and the UK's FTSE 100 advanced 2.5 per cent.

The Organisation for Economic Cooperation and Development on May 26 said the economy of its 30 members will grow 2.7 per cent this year, more than the 1.9 per cent predicted in November, as emerging economies such as China outpace debt-burdened developed countries to drive the global expansion. A report in the US on the same day showed orders for durable goods rose in April for the fourth time in five months.

"The growth momentum of the global economy is strong, and we expect this momentum to decline only little in the course of this year," Deutsche Bank AG strategists including London-based Joelle Anamootoo wrote in a report, adding that "risks to the outlook are skewed to the downside."

Mining stocks were the biggest gainers among the 19 industry groups in the Stoxx 600. BHP Billiton surged 5.3 per cent and Xstrata increased 6.9 per cent.