European Stocks Rally as Summers Drops Fed Chairman Bid

European stocks gained, extending a five-year high, as Lawrence Summers withdrew from consideration as Federal Reserve chairman, paving the way for Janet Yellen, who investors say will favor slower stimulus reduction.

EasyJet Plc and International Consolidated Airlines Group SA climbed as oil prices fell after the U.S. and Russia agreed on a plan to destroy Syrian chemical weapons. Hennes & Mauritz AB (HMB) advanced to a three-year high after sales topped estimates. Remy Cointreau SA (RCO) soared the most in almost four years as Chinese cognac shipments increased.

The Stoxx Europe 600 Index rallied 0.6 percent to 313.42 at the close of trading, the highest level since June 2008. The gauge has risen 5.4 percent this month as Chinese economic reports beat forecasts and the U.S. backed away from military action against Syria over a chemical-weapons attack that America says killed more than 1,400 people.

"The markets are having a bounce on the back of the Larry Summers news and the ongoing Syria talks," Kevin Lilley, head of European equities at Old Mutual Global Investors, which manages about $17 billion, said by phone today. "The market would prefer Yellen because it would be seen as more of the same. She would be more Bernanke-like in her approach and take longer to ease the current policy."

National benchmark indexes gained in 16 of the 18 western European markets today. Germany's DAX (DAX) surged 1.2 percent, while the U.K.'s FTSE 100 added 0.6 percent and France's CAC 40 rose 0.9 percent. The volume of shares changing hands in Stoxx 600-listed companies was 8.8 percent lower than the 30-day average, data compiled by Bloomberg show.

Summers Withdrawal

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Former Treasury Secretary Summers withdrew his nomination to lead the Fed before a two-day policy meeting starting tomorrow at which the central bank is forecast to reduce its stimulus. Summers would tighten Fed policy more than Yellen, who was his main rival to replace Chairman Ben S. Bernanke, according to a Bloomberg Global Poll of investors, analysts and traders last week.

"I have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interests of the Federal Reserve, the Administration, or ultimately, the interests of the nation's ongoing recovery," Summers wrote in a letter to President Barack Obama.

The Fed will decide to cut monthly purchases of Treasuries to $35 billion from $45 billion and keep mortgage-bond buying at $40 billion at this week's meeting, according to a Bloomberg survey of economists. Fifty-seven percent of investors surveyed in a Bloomberg Global Poll say they don't expect a sudden change in the markets if the Fed cuts its bond purchases, because they already anticipate tapering action.

Syrian Weapons

U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov reached an agreement over the weekend on a framework for finding, securing and destroying Assad's stock of poison gas. The deal calls for early signs of progress, giving Assad one week to submit an inventory of his toxic weapons, with initial inspections in Syria by November.

The Stoxx 600 may climb to 345 by the end of 2014, an 11 percent gain from last week's close, Gareth Evans and Thomas Pearce, strategists at Deutsche Bank AG in London, wrote in a report dated Sept. 13. Earnings can increase by 10 percent next year, they said.

"The PMIs are indicating that the global economy is beginning to regain traction," Evans and Pearce said, referring to surveys of purchasing managers. "This should mean that earnings-expectation cuts will soon come to an end."

EasyJet, IAG

EasyJet added 2.4 percent to 1,331 pence, while IAG, the owner of British Airways, climbed 3.3 percent to 325 pence. Air France-KLM Group surged 5.5 percent to 7.15 euros and Ryanair Holdings Plc rallied 4.2 percent to 6.44 euros.

West Texas Intermediate crude fell to a two-week low as the threat of imminent military strikes against Syria eased.

H&M jumped 4 percent to 259.20 kronor, the highest since September 2010. Europe's second-biggest clothing retailer said revenue at stores open at least a year rose 4 percent in August compared with the same month last year. The average estimate in a SME Direkt survey was for a 2.5 percent increase.

Remy Cointreau surged 7 percent to 84.10 euros for the biggest gain in the Stoxx 600 and largest advance since October 2009. Chinese cognac shipments rose 20.5 percent in August, increasing for the first time since January, according to UBS AG, quoting data from BNIC, a trade association of cognac makers.

Fresnillo Falls

Fresnillo Plc (FRES) and Polymetal International Plc sank at least 7 percent to lead declines in the Stoxx 600 after the precious-metals producers were not included in the NYSE Arca Gold Miners Index. Fresnillo tumbled 13 percent to 1,045 pence. Polymetal plunged 7.1 percent to 659.5 pence. African Barrick Gold Plc (ABG) also fell, losing 12 percent to 143.9 pence.

NYSE Euronext announced which companies will be added and deleted from the gauge of gold stocks after changing the methodology to include non-U.S. listed companies. Centamin Plc, the only U.K.-based company added to the index, advanced 2.3 percent to 45.5 pence. The changes will be effective Sept. 23., according to a statement by NYSE Euronext.