UniCredit SpA, Italy’s biggest bank, and Germany’s Deutsche Bank AG rose more than 8 percent. Citigroup rallied 16 percent in New York as Chief Executive Officer Vikram Pandit said the bank’s stock price doesn’t reflect its capital strength or earnings potential. Cnooc Ltd., China’s largest offshore oil producer, climbed 7.4 percent as crude traded above $47 a barrel.

Europe’s Dow Jones Stoxx 600 Index added 1.9 percent to 160.92 at 12:40 p.m. in London, rebounding from a 12-year low. The gauge has still declined 19 percent this year as companies from Anglo American Plc to Bayer AG posted disappointing results and credit-related losses at financial firms worldwide climbed to almost $1.2 trillion.

“We are seeing a little bit of exhaustion in the market from all the selling pressure,” said Mark Bon, a London-based fund manager who helps oversee about $750 million at Canada Life Ltd. “It’s encouraging that financials are making money. Citigroup’s a small comfort.”

Stocks extended their advance after Federal Reserve Chairman Ben S. Bernanke urged a sweeping overhaul of U.S. financial regulations in remarks prepared for an address to the Council on Foreign Relations in Washington. He reiterated that the central bank and other regulators “will take any necessary and appropriate steps” to ensure banks have capital to “function well in even a severe economic downturn.”

Futures on the Standard & Poor’s 500 Index climbed 2.2 percent as Bank of America Corp. increased, while the MSCI Asia Pacific Index advanced 0.9 percent from a five-year low after HSBC Holdings Plc jumped in Hong Kong.

‘Off a Cliff’

The Stoxx 600 and the S&P 500 fell to the lowest levels since 1996 yesterday as billionaire Warren Buffett said the economy “has fallen off a cliff.” The U.S. jobless rate will reach 9.4 percent this year and remain elevated through at least 2011, a monthly Bloomberg News survey indicated.

Citigroup gained 16 percent to $1.22 after Pandit wrote in an internal memorandum obtained by Bloomberg that he’s “disappointed” at the bank’s stock price. Citigroup was profitable in both January and February, and had $19 billion in revenue before disclosed writedowns, he added.

Once the world’s biggest bank by market value, Citigroup dropped below $1 in New York trading last week for the first time as investors lost confidence that the shares can recover after more than $37.5 billion in losses and a government rescue.

European Banks

A gauge of European banks posted the biggest advance among 19 industry groups in the Stoxx 600, adding 8 percent. UniCredit increased 9.4 percent to 80.3 euro cents. Deutsche Bank, Germany’s largest bank, climbed 8.8 percent to 21.02 euros.

Bank of America rose 12 percent to $4.20.

HSBC gained 13 percent to 394.25 pence in London after the shares jumped 14 percent in Hong Kong as the government probed a 24 percent tumble in the stock yesterday. Hong Kong’s Securities and Futures Commission is investigating trades put through at yesterday’s close, Financial Secretary John Tsang told reporters today in comments broadcast by local television.

Cnooc jumped 7.4 percent to HK$6.69. Woodside Petroleum Ltd., Australia’s second-largest oil producer, climbed 3.3 percent to A$37.09. Crude rose as high as $47.81 as Saudi Arabia told Asian refiners it will maintain supply cuts next month.

Energy, Raw-Material Shares

Exxon Mobil Corp., the world’s biggest oil producer, increased 1.1 percent to $65.25. ConocoPhillips, the second- largest U.S. refiner, added 1.7 percent to $37.15.

Antofagasta Plc paced a rally in mining companies, climbing 7.4 percent to 539 pence as copper advanced in London. The copper producer today posted a 23 percent rise in full-year net income to $1.71 billion, which includes a $1 billion gain on a disposal. The company also said it plans to pay a second-half dividend of 53.6 cents a share, which includes a 48-cent special payout.

Daimler AG led a gauge of European automakers higher, gaining 8.3 percent to 20.11 euros. Morgan Stanley raised the world’s second-largest maker of luxury cars to “overweight” from “underweight.”

Volkswagen AG climbed 2.3 percent to 212.63 euros. Europe’s biggest carmaker was raised to “neutral” from “underweight” at HSBC, which said Porsche SE “might even accelerate its stake increase.” Porsche surged 7 percent to 33.09 euros.

Utilities Decline

Utilities posted the biggest decline in the Stoxx 600, falling 2.3 percent.

E.ON AG dropped 7.7 percent to 18.67 euros. Germany’s biggest utility said it expects 2009 profit before writedowns on assets and hedging derivatives will fall 10 percent. Full-year earnings before writedowns jumped 9 percent to 5.6 billion euros ($7.11 billion) after it added generation capacity abroad.

RWE, Germany’s second-largest utility, fell 2.6 percent to 47.05 euros, extending its 2009 drop to 25 percent.

D/S Norden A/S dropped 15 percent to 149.5 kroner. Europe’s largest commodities shipping line forecast no “significant” recovery in rental rates this year and said its second-biggest shareholder plans to sell about half its stake.

It will be an “extremely challenging” market this year and there is unlikely to be “any significant rate increases,” the company said.

The worst start to a year since the gauge was created in 1970 has left the MSCI World Index of 23 developed nations valued at 10.2 times the profit of its 1,680 companies. That’s about half this decade’s average ratio of 21.3, data compiled by Bloomberg show.

 SOURCE: Bloomberg