European stocks climbed, extending the Stoxx Europe 600 Index’s largest rally in three weeks, as oil producers and retailers advanced.

Total SA (FP) and Tullow Oil Plc (TLW) advanced at least 2.5 percent as oil rose. KBC Groep NV rallied 5.9 percent following a report that Banco Santander SA (SAN) seeks to buy KBC’s Polish unit. Home Retail Group Plc (HOME) gained 2 percent after saying the sales decline at its Argos chain slowed.

The Stoxx 600 climbed 0.7 percent to 230.47 at the 4:30 p.m. close in London. The benchmark measure has swung between gains and losses at least 12 times today. The gauge has still tumbled 21 percent from this year’s high in February as concern mounted that Europe’s debt crisis is spreading. The decline has cut the index’s valuation to 9.6 times estimated earnings, near the cheapest since March 2009, according to data compiled by Bloomberg.

National benchmark indexes advanced in every western- European market except Greece. Germany’s DAX Index (DAX) gained less than 0.1 percent, while the U.K.’s FTSE 100 Index (UKX) and France’s CAC 40 Index both rose 0.4 percent.

Equities rallied around the world yesterday as investors speculated that President Obama will introduce a $300 billion plan to create more jobs in a speech to Congress today. Obama will propose a stimulus plan in the Republican-controlled House chamber as job growth stalls and the unemployment rate hovers above 9 percent.

Euro-Area Rates
The European Central Bank left interest rates unchanged at 1.5 percent, as predicted by all 57 economists in a Bloomberg News survey.

The central bank cut its growth forecasts for this year and next and President Jean-Claude Trichet said the region’s economy faces “particularly high uncertainty and intensified downside risks,” at a press conference in Frankfurt.

In the U.K., Bank of England policy makers resisted calls to extend economic stimulus as they attempted to navigate a path between accelerating inflation and a faltering recovery.

The nine-member Monetary Policy Committee, led by Mervyn King, maintained the target of its bond program at 200 billion pounds ($320 billion) as forecast by all but one of 41 economists in a Bloomberg News survey. It also held the benchmark interest rate at a record-low 0.5 percent today, as predicted by all 57 economists in a separate poll.

Total, Tullow Oil
Total rose 2.5 percent to 33.66 euros, helping lead gains for oil companies. Tullow Oil jumped 4.8 percent to 1,227 pence. Oil advanced as much as 1 percent before European stock markets closed.

KBC Groep NV (KBC) surged 5.9 percent to 17.53 euros after Polish newspaper Dziennik Gazeta Prawna reported that Banco Santander SA, Spain’s biggest bank, seeks to buy KBC’s Polish unit Kredyt Bank SA. The paper did not say where it got the information. Santander wants KBC to abandon the bidding process and enter direct negotiations, according to the Polish newspaper, which cited no one.

Home Retail jumped 2 percent to 117.8 pence after reporting that sales fell 8.6 percent in the 13 weeks ended Aug. 27, a slower pace than the 9.6 percent decline in its fiscal first quarter.

Danone (BN), the world’s biggest yogurt maker, declined 2.2 percent to 45.47 euros after Barclays Plc wrote that the company predicts its third quarter will “be tougher” than the first half of the year.