European stocks close:

European stocks advanced for a second day after German business confidence unexpectedly climbed and Federal Reserve Chairman Ben S. Bernanke said continued accommodative monetary policy is still needed.

Federal Reserve Chairman Ben S. Bernanke said that while he’s encouraged by the unemployment rate’s decline to 8.3 percent, continued accommodative monetary policy will be needed to make further progress.

Chancellor Angela Merkel gave her first indication that she is prepared to allow an increase in the debt-crisis firewall, saying that Germany could let the temporary and permanent rescue funds run in parallel.

National benchmark indexes rose in 15 of 18 western- European markets. Germany’s DAX rallied 1.2 percent, France’s CAC 40 climbed 0.7 percent, the U.K.’s FTSE 100 gained 0.8 percent while Spain’s IBEX 35 Index fell 0.7 percent.

EasyJet rallied 7.5 percent to 495.80 pence after Europe’s second-biggest airline forecast a first-half pretax loss of 110 million to 120 million pounds. The company had predicted a loss of 140 million to 160 million pounds.

Larger Irish rival Ryanair Holdings Plc advanced 2.6 percent to 4.43 euros, while Deutsche Lufthansa AG gained 1.6 percent to 10.47 euros.

Tullow Oil increased 6.6 percent to 1,570 pence after the U.K. explorer reported Kenya’s first oil discovery.

Banco Sabadell SA led Spanish lenders lower, falling 4 percent to 2.15 euros. Banco Bilbao Vizcaya Argentaria SA, Spain’s biggest bank, retreated 1.4 percent to 6.15 euros.

Italy’s Prime Minister, Mario Monti, warned that Spain could reignite the European debt crisis as euro-area ministers this week prepare a deal to strengthen the region’s financial firewall.

Spanish construction-related companies also declined in Madrid trading. Actividades de Construccion y Servicios SA dropped 4 percent to 20.27 euros and Sacyr Vallehermoso SA retreated 2.3 percent to 2.47 euros.