European Stocks Rally, Led by Altadis, Cadbury Schweppes, Bayer

European stocks rallied for the first time this week after takeovers accelerated and U.S. financial companies offered reassurance a subprime loan crisis won't spread to the rest of the economy.

"This will be a great buying opportunity,'' said Thomas Steinemann, who oversees the equivalent of $24 billion as chief investment officer at Zurich-based Vontobel Asset Management. ``Some investors think the problems with mortgages could spill over into the credit market as a whole. This is unlikely.''

Altadis SA surged after Imperial Tobacco Group Plc offered 11.5 billion euros ($15 billion) for the company. Cadbury Schweppes Plc rose to the highest in a decade on plans to sell or spin off its North American beverage unit. Bayer AG, Germany's biggest drugmaker, advanced as earnings rose.

The Dow Jones Stoxx 600 Index climbed 1.7 percent to 357.74 at 4:04 p.m. in London, with all 18 industry groups rising. The Stoxx 50 gained 1.5 percent as did the Euro Stoxx 50, a measure for the 13 nations sharing the euro.

Concern that a surge in U.S. loan defaults will hurt growth sent the Stoxx 600 Index down 2.7 percent yesterday, the biggest loss since a sell-off that wiped about $3.3 trillion from the value of global stocks ended on March 5.

Bear Stearns Cos. today joined Lehman Brothers Holdings Inc. in assuaging concern that defaults among the riskiest borrowers will drag down profits at banks and other lenders. The companies are the largest U.S. underwriters of mortgage bonds. Bear Stearns said first-quarter profit rose helped by higher revenue from trading derivatives.

Stocks worldwide will weather a surge in U.S. subprime debt defaults because job creation and earnings growth are strong enough, according to Credit Suisse Group strategists in a report to investors dated yesterday.

`Attractive Asset'

``Stocks are the most attractive asset class worldwide,'' said Richard Zellmann, director of sales and research at First Private Investment in Frankfurt. ``There are a lot of pearls to be found. Private equity is awash with cash and looking for takeover targets.''

So far this year, mergers and acquisitions in Europe have totaled $290 billion, according to data compiled by Bloomberg. Deals reached a record $1.4 trillion in 2006, as companies used cash and relatively low interest rates to take over rivals.

National benchmarks gained in 17 of the 18 western European markets. Iceland stocks fell after Fitch Ratings downgraded the country's debt ratings. The U.K.'s FTSE 100 rose 1.7 percent while Germany's DAX advanced 1.6 percent. France's CAC climbed 1.2 percent.

Cadbury Schweppes

Altadis soared 17 percent to 45.39 euros, leading makers of personal and household goods higher. The Madrid-based maker of Cohiba cigars and Gauloises cigarettes said it received a takeover approach from Imperial worth 45 euros a share.

The Spanish company said its board will meet to consider the offer. Imperial shares jumped 8.4 percent to 2,219 pence.

``This is the starting gun'' for more bids, said Alberto Espelosin, strategist at Zaragoza, Spain-based Ibercaja Gestion, which oversees about $7 billion, including Altadis shares. ``The amount of hidden value in a company like this is big.''

Cadbury Schweppes, the U.K. maker of Dairy Milk chocolate and Dr Pepper soda, added 3.5 percent to 623 pence after rising as much as 7.1 percent.

Chief Executive Officer Todd Stitzer said ``many candidates'' may bid for the beverage unit and ``now is the moment to separate'' the division.

The business may be worth as much as 8.2 billion pounds ($15.9 billion), according to Jon Cox, an analyst at Kepler Equities in Zurich with a ``buy'' recommendation on the stock.

`Bull Market Correction'

Bayer added 2.9 percent to 43.97 euros. Net income in the fourth quarter increased to 311 million euros from 46 million euros a year earlier. That beat the median estimate of 11 analysts Bloomberg News surveyed.

Prudential Plc, Britain's No. 2 insurer, rose 4.1 percent to 669.5 pence after saying it is considering as many as 3,000 job cuts, extending cost reductions that have started to lift profit in its home market.

``The sell-off was a bull market correction,'' said Gerhard Schwarz, an equity strategist at UniCredit Markets & Investment Banking (HVB) in Munich. ``We are getting close to extremely attractive buy-in levels.''

Atos Origin SA, France's second-largest supplier of computer services, soared 23 percent to 48.72 euros after the supplier of computer services for the Beijing Olympics said it was approached about a potential takeover.

`Expressions of Interest'

``Despite expressions of interest made to it that did not constitute offers, the company is not engaged in any financial operation with respect to its share capital,'' Atos Origin said in an e-mailed statement.

Shares of Boehler-Uddeholm AG gained 4.4 percent to 60.90 euros, on speculation Salzgitter AG, Germany's No. 2 steelmaker, might bid for the Austrian steelmaker after the end of takeover talks with Canada's Algoma Steel Inc.

``The shares are boosted by rumors Salzgitter might bid for the company after talks with Algoma failed,'' said Christof Ruemmelein, a trader at Merck Finck & Co. in Munich.

Salzgitter spokesman Bernd Gersdorff said the companies aren't in talks. Randolf Fochler, a spokesman for Boehler in Vienna said there are ``definitely no talks'' between the two companies. Salzgitter shares added 2.3 percent to 100.98 euros.

Higher metal prices boosted commodity shares, which were the region's leading gainers. Nickel rose to a record for a fourth consecutive day in London as stockpiles of the metal used in stainless steel plunged. Copper advanced to the highest in more than two months.

`Economic Uncertainty'

BHP Billiton, the world's biggest mining company, gained 5.3 percent to 1,042 pence. Xstrata Plc, the world's fourth-largest copper and nickel producer, advanced 4.7 percent to 2,409 pence. Antofagasta Plc, the owner of three copper mines in Chile, added 5.4 percent to 472 pence.

BAE Systems Plc advanced 4 percent to 447 pence after Citigroup Inc. raised its recommendation for shares of Europe's largest weapons maker to ``buy'' from ``hold.''

``Amid economic uncertainty defence stocks look more attractive and we like the defence industry fundamentals right now,'' David Perry, an analyst at Citigroup in London, wrote in a report published today.

Charter Plc advanced 6.7 percent to 860.5 pence after the world's biggest maker of welding gear said full-year profit advanced 65 percent on demand in emerging markets and spending by utilities customers in North America.

Natixis slipped 5 percent to 18.01 euros. France's fourth- largest bank by market value said it has about $1.4 billion of exposure to the U.S. subprime mortgage lending market.

Geberit International AG lost 5.5 percent to 1,839 Swiss francs. Europe's biggest maker of plumbing systems said fourth- quarter profit rose 41 percent to 61.5 million francs ($50.6 million), less than some analysts predicted.

To contact the reporter on this story: Andreas Hippin in Frankfurt at ahippin@bloomberg.net