Stocks: Tuesday’s review

European stocks climbed, posting their biggest three-day rally this year, amid optimism central banks will add to stimulus measures and as a report showed that U.S. factory orders rebounded in May.

The European Central Bank and the Bank of England will announce interest-rate decisions on July 5. ECB officials will lower their benchmark rate by 25 basis points to a record low 0.75 percent, according to the median forecast.

The People’s Bank of China may cut lenders’ reserve requirements to increase liquidity in the banking system, according to a commentary on the front page of today’s China Securities Journal, which is published by the official Xinhua News Agency. The central bank announced a cut to interest rates on June 7, a day after the newspaper published a commentary urging the move.

National benchmark indexes gained in every western-European market. France’s CAC 40 advanced 1 percent and the U.K.’s FTSE 100 increased 0.8 percent. Germany’s DAX rose 1.3 percent.

Peugeot climbed 3.7 percent to 7.72 euros as Europe’s second-biggest carmaker plans to eliminate as much as 10 percent of its French workforce to reduce operational costs, a union official said. Peugeot may discuss its plans for the reorganization at its next works council meeting on July 12.

Swiss Re Ltd. rose 1.7 percent to 61.10 Swiss francs after BlackRock Inc. said it will buy Private Equity Partners AG from the world’s second-biggest reinsurer and integrate the business with its own fund-of-funds division.

U.S. stocks advanced, sending the Standard & Poor’s 500 Index to a two-month high, after data showed factory orders topped estimates and as speculation grew that global central banks will act to spur economic growth.

Equities climbed as factory orders rose in May for the first time in three months. Yet declining jobs data in the U.S. this week may prompt the Federal Reserve to initiate fresh stimulus, BNP Paribas SA said. The European Central Bank is forecast to cut interest rates this week to help curb the debt crisis, while a state-owned newspaper in China said the time is ripe for a reduction in banks’ reserve-requirement ratios.

The Morgan Stanley Cyclical Index of companies most-tied to the economy rose 1.3 percent. Alcoa (АА), the largest U.S. aluminum producer, added 3.2 percent to $8.90. Caterpillar (САТ), the biggest maker of construction equipment, advanced 3.3 percent to $86.46.

Car companies in the S&P 500 (SPX) added 2.1 percent for the second-biggest gain among 24 groups. General Motors, Ford and Chrysler Group LLC said U.S. auto sales exceeded estimates in June. Ford rallied 2.2 percent to $9.60. GM added 5.6 percent to $20.67.

Duke Energy Corp. (DUK) lost 1.7 percent to $68.69 after unexpectedly announcing the resignation of Bill Johnson, previously named to be the chief executive officer after its takeover of Progress Energy Inc. (PGN) James Rogers, the head of Duke, is CEO of the merged companies effective immediately.