May 26 (Bloomberg) -- European stocks rose for a second day, their first back-to-back gain in two weeks, on optimism that the global economy will expand fast enough to maintain earnings growth.

``Stocks are pricing in sustained economic growth,'' said Alejandro Velasco, who helps manage $530 million at Banca Privada D'Andorra SA in Andorra. ``There's been excessive concern about inflation. One must take advantage of recent declines.''

Unilever advanced after Deutsche Bank AG recommended the company, citing its profit outlook. ThyssenKrupp AG and Corus Group Plc rose on takeover speculation. Arcelor SA fell as the steelmaker agreed to buy Russia's OAO Severstal to block a hostile bid from Mittal Steel Co.

The Dow Jones Stoxx 600 Index added 2 percent to 323.17. The index has risen 1.4 percent this week, the first gain in three weeks. The Stoxx 50 rose 1.7 percent today, while the Euro Stoxx 50 index for the 12 countries using the euro advanced 1.8 percent.

Stocks in Europe have recovered about a third of this month's slump that was triggered by concern accelerating inflation would prompt higher interest rates. Reports today and yesterday showed the U.S. economy is growing just enough to keep inflation in check.

Members of the Stoxx 600 may increase earnings by an average 11 percent this year, according to analysts' estimates compiled by FactSet Research Systems Inc. in London. That's up from a prediction of 9.2 percent growth at the start of the month. Profits advanced 24 percent in 2005.

Reports this week showed business confidence unexpectedly rose this month in Italy and held near a 15-year high in Germany.

Personal Incomes

In the U.S., a report today showed a gauge tied to consumer spending last month was in line with economists' expectations. The Commerce Department also reported personal incomes rose 0.5 percent, less than a 0.7 percent forecast. The government said yesterday the economy expanded in the first quarter at a slower rate than predicted, with the price indicator matching estimates.

``We are seeing relief in the markets about the income figures, which indicate that upward pressure on wages hasn't been as high as people suspected,'' said Daniel Knuchel, chief investment officer at ATAG Asset Management in Zurich, which oversees the equivalent of $4.1 billion.

The Stoxx 600 slumped 10 percent between May 10 and May 22. Today's gain marks the first consecutive advance since May 9.

Indexes rose in all 18 western European markets. Germany's DAX gained 1.4 percent, while the U.K.'s FTSE 100 advanced 2 percent. France's CAC 40 added 1.9 percent.

`Threat Behind Us'

``The threat of low growth and inflation is behind us,'' said Claudio Morsenchio, who helps manage the equivalent of about $750 million at Banco Emiliano Romagnolo SpA in Bologna, Italy. ``The correction was excessive. European markets will see interesting levels soon.''

Unilever gained 3.3 percent to 1,221 pence. Deutsche Bank raised its recommendation on the shares to ``buy'' from ``hold,'' and raised a price estimate 11 percent to 20 euros, saying the shares were cheap relative to peers' stocks.

Nutreco Holding NV increased 3.8 percent to 46.96 euros. Goldman Sachs Group Inc. analysts raised a recommendation on stock in the Dutch animal-feed maker to ``outperform'' from ``in-line.'' They cited optimism the company will use cash to buy back shares or pay a special dividend.

Arcelor slipped 3 percent to 33.05 euros in Paris. The Luxembourg-based company agreed to buy a controlling stake in Severstal, in a 13 billion-euro ($16.6 billion) transaction that will create the world's biggest steelmaker.

`No Logic'

``I'm totally amazed,'' said Daniel Broby, chief investment officer at Bankinvest in Copenhagen, who helps manage $14 billion in assets. ``There's no industrial logic. The board has secured its future at the expense of shareholders.''

Mittal, currently the world's largest maker of steel, added 2 percent to 25 euros.

Speculation that Mittal may seek other targets lifted shares of steel companies in the region. ThyssenKrupp, Germany's largest steelmaker, climbed 4.8 percent to 27.54 euros. Corus Group, the U.K.'s biggest, rose 3.4 percent to 385.75 pence.

``The deal raises the value of steel stocks and signals that consolidation may continue,'' said Dirk Werner, an analyst at Independent Research GmbH in Frankfurt, who has a ``buy'' recommendation on the stock.

TNT NV advanced 1.8 percent to 29.05 euros. Europe's second-biggest express-package delivery company said it plans to sell a logistics unit for at least 1.15 billion euros so it can focus on more profitable mail and express services.

Mergers, Acquisitions

BAA Plc, the world's largest airport operator, gained 4.2 percent to 820.5 pence. Grupo Ferrovial SA, Spain's second- biggest builder, will press on with an 8.75 billion-pound ($16.4 billion) bid for BAA even after regulators said they're probing the U.K. company's share of Britain's airport market.

Natexis Banques Populaires climbed the most in the Stoxx 600, surging 11 percent to 206 euros. The investment-banking unit of Groupe Banque Populaire gained after Caisse des Depots et Consignations agreed to sell its stake in Groupe Caisse d'Epargne, removing an obstacle to a merger between Caisses d'Epargne and Natexis's parent company.

House of Fraser Plc, the U.K.'s third-largest department- store company, jumped 5.4 percent to 132.25 pence on speculation that Icelandic investor Baugur Group HF may be preparing a takeover bid.

An offer by Baugur may take place in ``weeks,'' the Daily Telegraph reported today, citing an interview with Jon Asgeir Johannesson, chief executive officer of the Icelandic company. House of Fraser said May 2 it had received a ``very preliminary'' approach from an unidentified suitor that may lead to a bid.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net