European stocks close:

European stocks climbed, with the Stoxx Europe 600 Index extending a five-month high, amid speculation that China’s slowest economic growth in more than two years will lead to easier monetary policy.

Gross domestic product in China, the world’s second-biggest economy, increased 8.9 percent in the fourth quarter from a year earlier, the statistics bureau said in Beijing. The economy expanded at the slowest pace in 10 quarters, increasing pressure on Premier Wen Jiabao to ease monetary policy.

The European Financial Stability Facility, the euro area’s bailout fund, lost its top credit rating yesterday at Standard & Poor’s following downgrades of France and Austria on Jan. 13.

A report today showed that German investor confidence jumped the most on record in January. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, surged to minus 21.6 from minus 53.8 in December, the biggest gain since the index started in December 1991.

National benchmark indexes climbed in every western- European market except Luxembourg and Iceland. The U.K.’s FTSE 100 Index rose 0.7 percent, Germany’s DAX Index advanced 1.8 percent and France’s CAC 40 Index jumped 1.4 percent.

Carmakers led gains among the 19 industry groups on the Stoxx 600. Daimler rose 3.8 percent to 40.85 euros and Renault SA jumped 2.6 percent to 31.68 euros.

Rio Tinto advanced 2.9 percent to 3,694 pence after saying that fourth-quarter iron ore production rose to 51.2 million metric tons in the three months ended Dec. 31 from 50.1 million tons a year earlier

Afren Plc surged 13 percent to 130.5 pence. The company said it discovered oil and gas at the Okoro East exploration well off southeast Nigeria.