European stocks advanced to the highest level since July as the Federal Reserve raised its economic assessment of the world’s largest economy. The Federal Open Market Committee said late yesterday that strains in global financial markets have eased and the labor market is gathering strength. At the same time, it said that the unemployment rate is “elevated” and “significant downside risks” remain. Federal Reserve Chairman Ben S. Bernanke is holding to his plan to the keep benchmark interest rate close to zero through at least 2014.

Greece’s credit rating was lifted out of the default category by Fitch Ratings on optimism that a debt swap will reduce the risk that the country eventually reneges on its obligations. Greece was raised four levels to B- from restricted default and given a stable outlook by Fitch. New government bonds have a B- rating, while debt that is not governed by Greek law has a C rating pending settlement on April 11, Fitch said.

Italy sold 6 billion euros of bonds today, with borrowing costs on its three-year debt falling to the lowest since October 2010 as European Central Bank loans helped boost demand. The Treasury sold 5 billion euros of a new three-year bond to yield 2.76 percent and 1 billion euros of seven-year bonds at 4.3 percent, meeting the 6 billion-euro maximum set for the sale.

National benchmark indexes rose in 15 of the 18 western- European (SXXP) markets. Germany’s DAX Index added 1.2 percent. France’s CAC 40 Index gained 0.4 percent and the U.K.’s FTSE 100 Index fell 0.2 percent.

EON AG, Germany’s biggest utility, gained 7 percent after it reported 2011 earnings that topped analysts’ estimates.

Gauges of European banks and insurers pulled the Stoxx 600 higher, with Credit Suisse rallying 5 percent to 26.3 Swiss francs, and Legal & General advancing 7.2 percent to 134.3 pence. Natixis SA added 5.2 percent to 2.95 euros and Deutsche Bank AG gained 3.4 percent to 38.17 euros.

Arkema fell 5 percent to 69 euros. Investor Groupe Bruxelles Lambert SA is offering 6.2 million shares of the company for as much as 450 million euros. The shares are being sold for about 69.90 euros each, according to a term sheet.