European stocks advanced after the euro-area central bankunexpectedly cut the benchmark interest rate and reports that GreekPrime Minister George Papandreou may quit reduced the chance of avote on the bailout package.

Swiss Re Ltd. and Man Group Plc each gained more than 5 percentafter reporting better-than-expected earnings. Cable & WirelessCommunications Plc jumped 9.6 percent after saying restructuring isahead of schedule.

The benchmark Stoxx Europe 600 Index climbed 2.2 percent to242.52 at 1:23 p.m. in London, after the European Central Bank'srate decision. The stocks earlier erased their losses amidspeculation that Greece will cancel the referendum as Papandreou'sruling Pasok party split over the question.

“Market participants are speculating that the Greek primeminister has lost the majority and this could lead to acancellation of the referendum and Papandreou's possibleresignation,” said Stephane Ekolo, chief European strategist atMarket Securities in London. “From a market perspective, it seemsto be good news. It somehow reduces uncertainty and may pave theway for the implementation of the austerity measures.”

The ECB unexpectedly cut interest rates as Italian and Spanishborrowing costs soared after euro-area leaders raised the prospectof Greece exiting the monetary union.

ECB officials, meeting under the presidency of Mario Draghi forthe first time, cut the benchmark interest rate by 25 basis pointsto 1.25 percent. Forty nine of 55 economists in a Bloomberg Newssurvey expected no change, four predicted a quarter-point reductionand two forecast a half-point cut.

Greek Prime Minister Papandreou will step down today and proposea coalition government headed by former ECB vice- president LucasPapademos, the BBC reported, without saying how it got theinformation.

Papandreou won't resign and plans to speak in parliament todayas scheduled, two officials with the ruling party said.

The Stoxx 600 has lost 2.7 percent so far this week as the Greekreferendum call had surprised euro-area leaders who cut off aid tothe region's most indebted country. They viewed the referendum as avote on Greece's membership of the euro.

Crisis talks ended late yesterday with German Chancellor AngelaMerkel and French President Nicolas Sarkozy withholding 8 billioneuros ($11 billion) of assistance and warning Greece it will loseall European aid if it votes against the package agreed upon onlylast week.

“The referendum will revolve around nothing less than thequestion: does Greece want to stay in the euro, yes or no?,” Merkeltold reporters. Sarkozy said Papandreou's government won't get a“single cent” of aid if voters reject the plan.

Leaders from the Group of 20 economies are meeting at a summitin Cannes, France, today with a discussion on Greece and the euroarea.

Federal Reserve Chairman Ben S. Bernanke signaled additionalmonetary stimulus may be needed to lower U.S. unemployment aspolicy makers projected little acceleration in growth after lastquarter's pickup.

Potential actions are “on the table,” including a third round ofsecurities purchases, extending the period of record- low interestrates or being more specific about when rates would rise, Bernankesaid at a press conference yesterday after European marketsclosed.

Bernanke warned that economic improvement will probably be“frustratingly slow,” with policy makers forecasting a 1percentage-point drop in the jobless rate to about 8 percent overtwo years.

Swiss Re rose 6.6 percent to 49.26 Swiss francs. The world'ssecond-biggest reinsurer said third-quarter profit more thandoubled to $1.35 billion. That beat the $539 million averageestimate of nine analysts surveyed by Bloomberg.

Man Group gained 5.2 percent to 148.6 pence. The biggestpublicly traded hedge-fund manager reported a smaller-than-forecast decline in pretax profit in the fiscal first half. Pretaxprofit dropped to $195 million in the six months through Septemberfrom $227 million in the year-earlier period, London- based ManGroup said. Man had earlier forecast pretax profit of $185million.

Cable & Wireless Communications jumped 9.6 percent to 40pence. The company said first-half net profit before exceptionalitems rose 9 percent to $163 million. The company also saidrestructuring is ahead of schedule.

Rheinmetall AG tumbled 3.1 percent to 36.81 euros. The maker ofKS Kolbenschmidt engine pistons and a partner in Germany's Pumabattle tank said it won't stage an initial public offering of itsautomotive unit, citing stock-market declines. Rheinmetall'sthird-quarter earnings before interest and taxes rose to 76 millioneuros, missing analyst estimates.

Service industries in the U.S. probably grew at a faster pace inOctober, indicating the biggest part of the economy is holding up,economists said before a report today.

The Institute for Supply Management's non-manufacturing indexrose to 53.5 from 53 in September, according to the median estimateof 77 economists surveyed by Bloomberg News. Readings above 50signal expansion.

Bloomberg