European Stocks Gain for Third Day; India’s Sensex Jumps 17%

European stocks rose for a third day, led by financial companies, as the cost of borrowing between banks dropped by the most in two months and Goldman Sachs Group Inc. said the equities rally is likely to continue., Bloomberg 5/18/2009 11:01:53 AM

Lloyds Banking Group Plc increased 6.1 percent after confirming investors will be offered 4 billion pounds ($6.1 billion) of stock this week as the government converts preference shares. Thomas Cook Group Plc surged 7 percent after Kuoni Reisen Holding AG, the largest Swiss travel company, said it’s looking to snap up competitors. Vedanta Resources Plc gained 5.4 percent as the biggest copper producer in India was boosted by the ruling Congress Party’s election victory.

Europe’s Dow Jones Stoxx 600 Index added 1.6 percent to 206.13 at 2:53 p.m. in London. The measure lost 3.2 percent last week after a report showed Europe’s economy contracted the most since at least 1995 in the first quarter and the Bank of England said the U.K. faces a slow recovery.

The Stoxx 600 has jumped 30 percent since March 9 on speculation the worst of the recession is over. The rebound is likely to continue, according to Goldman Sachs strategists, who cited similar rallies in history and recovering economic data.

Asian stocks fell, fueled concern a two-month equity rally had outpaced earnings prospects. Panasonic, the world’s biggest maker of plasma televisions, tumbled 7.6 percent in Tokyo. Mizuho Financial Group Inc., Japan’s No. 2 listed bank, fell 3.8 percent on share-sale plans. Reliance Industries Ltd., India’s biggest company by market value, soared 23 percent before the market’s surge triggered a halt in stock trading.

The MSCI Asia Pacific Index slipped 0.5 percent to 96.84 at 7:20 p.m. in Tokyo. Through the end of last week, the gauge had climbed 38 percent from a more than five-year low on March 9. The rally lifted the average valuation of stocks in the measure to 1.4 times the book value of assets as of May 15, 17 percent higher from the end of 2008.

Japan’s Nikkei 225 Stock Average declined 2.4 percent. Hong Kong’s Hang Seng Index climbed 1.4 percent and China’s Shanghai Composite Index rose 0.3 percent, led by coal producers after China Shenhua Energy Co. said consumption of the fuel may increase. India’s benchmark stock index jumped a record 17 percent, after Prime Minister Manmohan Singh’s Congress Party won nationwide elections.