European stocks rallied the most in more than two months as the Federal Reserve’s decision to slow the pace of its stimulus boosted investor confidence that the U.S. economic recovery is on course.

The Stoxx Europe 600 Index rose 1.6 percent to 319.06 at 4:30 p.m. in London, for its biggest two-day gain since June. The gauge pared its losses since Nov. 28, when it hit its highest level since May 2008, to 1.9 percent.

The Fed said yesterday it will reduce its bond purchases to $75 billion a month from $85 billion in January, taking the first step toward unwinding the stimulus that Chairman Ben S. Bernanke put in place to help the economy recover from one of its worst recessions.

The U.S. central bank reiterated that it intends to hold its target interest rate near zero at least as long as unemployment exceeds 6.5 percent and the outlook for inflation is no higher than 2.5 percent. Twelve out of 17 Federal Open Market Committee participants predict the first increase in the main interest rate will come in 2015.

In Europe, finance ministers reached an agreement on how to deal with failing banks in the 17-nation euro area by pledging a 55 billion-euro ($75 billion) industry-financed fund for the next 10 years. They also backed an agency to make decisions on handling failing banks and when to share costs.

National benchmark indexes rose in all of the 18 western-European markets.

FTSE 100 6,584.7 +92.62 +1.43% CAC 40 4,177.03 +67.52 +1.64% DAX 9,335.74 +153.99 +1.68%

Saab surged 33 percent to 176.60 kronor, its highest price since May 2008. The Swedish maker of Gripen jets beat Boeing Co. and Dassault Aviation SA to win the contract to supply 36 jet fighters to Brazil. Celso Amorim, the South American country’s defense minister, said the government picked Saab over Boeing because of the performance and cost of its aircraft as well as Saab’s willingness to transfer technology. The deal is worth $4.5 billion through 2023.

Amadeus rose 3.8 percent to 29.47 euros, its highest price since it listed its shares in April 2010. Group revenue will reach 3.16 billion euros in 2013, while adjusted earnings will be 1.40 euros per share, the company said late yesterday. The forecasts beat the average analyst estimates of 3.1 billion euros in sales and 1.39 euros in earnings per share. Amadeus will also increase its gross interim dividend to 30 euro cents.

Algeta advanced 1.4 percent to 358.60 kroner, its highest price since it sold shares to the public in 2007. Bayer said it will buy the Oslo-based drugmaker for about 17.6 billion kroner ($2.9 billion). Bayer will make the offer at 362 kroner per share. Algeta said last month it had received a preliminary offer from Bayer for 336 kroner.

Mediaset SpA jumped 16 percent to 3.37 euros, its biggest rally since its listing in 1996. Deutsche Bank AG analyst Laurie Davison wrote that a plan by the company and Mediaset Espana Comunicacion SA to spin off their pay-TV operations was aimed at bringing in a partner for that business. A stake sale in the new entity to Vivendi SA or Al-Jazeera could reduce the costs of soccer-broadcasting rights, the analyst wrote.

AstraZeneca Plc added 1 percent to 3,597 pence, the lowest price since March 2002. The drugmaker will pay as much as $4.3 billion to buy Bristol-Myers Squibb Co.’s share of their diabetes drugs joint venture. The purchase gives AstraZeneca sole control of treatments such as Onglyza and Forxiga.

U.S. stock-index futures fell, as data showed jobless claims unexpectedly rose last week.

Global markets:

Nikkei 15,859.22 +271.42 +1.74%

Hang Seng 22,888.75 -255.07 -1.10%

Shanghai Composite 2,127.79 -20.49 -0.95%

FTSE 6,550.55 +58.47 +0.90%

CAC 4,150.07 +40.56 +0.99%

DAX 9,272.54 +90.79 +0.99%

Crude oil $97.82 (+0.02%).

Gold $1200.70 (-2.78%).

European stocks rallied after the Federal Reserve’s decision to slow the pace of its bond purchases boosted investor confidence in the U.S. economic recovery. U.S. index futures slipped after equities jumped to a record in New York, while Asian shares pared gains.

The U.S. central bank said it plans to cut its monthly bond purchases to $75 billion from $85 billion, taking its first step toward unwinding the monetary stimulus that Chairman Ben S. Bernanke put in place to help the economy recover from one of its worst recessions. The Fed’s purchases will be divided between $40 billion in Treasuries and $35 billion in mortgage bonds starting in January, Bernanke said after concluding a two-day policy meeting.

The central bank reiterated that it will probably hold its target interest rate near zero at least as long as unemployment exceeds 6.5 percent and the outlook for inflation is no higher than 2.5 percent. A majority of Federal Open Market Committee participants, or 12 out of 17, predict the first increase in the main interest rate in 2015.

Saab surged 23 percent to 163.10 kronor. The Swedish maker of Gripen jets beat Boeing Co. and Dassault Aviation SA to win the contract to supply 36 jet fighters to South America’s largest economy.

Amadeus rose 1.5 percent to 28.80 euros. Group revenue will be 3.16 billion euros ($4.4 billion) in 2013, while adjusted earnings will be 1.40 euros per share, the company said in a statement late yesterday. That compared with the average analyst estimate of 3.1 billion euros in sales and 1.39 euros in earnings per share for this year. Amadeus will also increase its gross interim dividend to 30 euro cents.

Algeta advanced 1.6 percent to 359.20 kroner, its highest price since it sold shares to the public in 2007. Bayer will begin an offer to buy Algeta shares at 362 kroner each, the Leverkusen, Germany-based company said. Algeta said last month it had received a preliminary offer from Bayer for 336 kroner.

FTSE 100 6,557.14 +65.06 +1.00%

CAC 40 4,167.46 +57.95 +1.41%

DAX 9,314.5 +132.75 +1.45%

Asian stocks rose after the Federal Reserve expressed enough confidence in the U.S. labor market to taper asset purchases while promising to hold interest rates close to zero. Shares in China and Hong Kong fell on concern higher funding costs will hurt growth.

Nikkei 225 15,859.22 +271.42 +1.74%

S&P/ASX 200 5,202.23 +106.13 +2.08%

Shanghai Composite 2,127.79 -20.49 -0.95%

Fast Retailing Co., Asia’s biggest apparel chain, climbed 4.5 percent, pushing Japan’s Nikkei 225 Stock Average to its highest close since 2007 as the yen touched a five-year low to the dollar.

Fanuc Corp., a maker of factory robotics, rose 4.1 percent to a record in Tokyo.

Caltex Australia Ltd. surged 13 percent as the petroleum refiner said profit may climb to A$340 million ($300 million).

Hang Lung Properties Ltd., a Hong Kong developer that invests in mainland malls, fell 3.6 percent.

Nikkei 225 15,587.8 +309.17 +2.02%

Hang Seng 23,171.88 +102.65 +0.44%

S&P/ASX 200 5,096.1 -7.09 -0.14%

Shanghai Composite 2,148.29 -2.79 -0.13%

FTSE 100 6,492.08 +5.89 +0.09%

CAC 40 4,109.51 +40.87 +1.00%

DAX 9,181.75 +96.63 +1.06%

Dow +293.22 16,168.48 +1.85%

Nasdaq +46.38 4,070.06 +1.15%

S&P +29.75 1,810.75 +1.67%