Sept. 13 (Bloomberg) -- Swiss stocks advanced, ending a two-day decline, as financial shares reversed earlier losses and German Chancellor Angela Merkel said she wouldn’t allow an uncontrolled insolvency in Greece.

UBS AG, the largest Swiss bank, advanced 5.9 percent and Credit Suisse increased 2.7 percent. Novartis AG, Europe’s second-biggest drugmaker by sales, gained 1.2 percent after raising its cost-savings target from purchasing eye-care company Alcon Inc.

The Swiss Market Index, a measure of the biggest and most actively traded companies, advanced 1.1 percent to 5,359.14 at the 5:30 p.m. close in Zurich as 13 shares rose in the 20-member gauge. The gauge had earlier retreated 0.4 percent. The broader Swiss Performance Index increased 1 percent.

“The mood swing in the market today is a sign some investors think so much bad news is already priced in that, no matter what, they’ll get a great deal on equities,” said Henrik Drusebjerg, a senior strategist at Nordea Bank AB in Copenhagen. “Others can’t run away fast enough from this as they think it can get much worse.”

The SMI has still tumbled 20 percent from this year’s high on Feb. 18 amid concern that European leaders won’t contain the region’s debt crisis and that the U.S. recovery will stall.

Banks Gain

Banks recouped their losses today as BNP Paribas SA, France’s biggest lender, reversed a drop of as much as 12 percent. The bank closed 7.2 percent higher after denying a story in the Wall Street Journal that it was having problems borrowing dollars from U.S. money market funds.

Nicolas Lecaussin, director of development at France’s Institute for Economic and Fiscal Research, wrote in an opinion piece in the Journal that an unidentified BNP official told him the bank could no longer borrow in dollars.

UBS climbed 5.9 percent to 10.91 francs and Credit Suisse AG, the second-biggest Swiss lender, rose 2.7 percent to 20.33 francs. A report showed the biggest fund investors including UBS added $21 billion to hedge fund pools in the first half.

Swiss Re AG, Europe’s second-biggest reinsurer, climbed 1.2 percent to 37.94 francs while Zurich Financial Services AG gained 2.6 percent to 163.70 francs.

Merkel said in a German radio interview that her “top priority is to avoid an uncontrolled insolvency, because that wouldn’t just hit Greece, and the danger that it hits everyone, or at least a number of other countries, is very big,” according to a transcript provided by Berlin-based broadcaster Inforadio.

Novartis Climbs

Novartis increased 1.2 percent to 48.35 francs as the drugmaker increased forecasts for cost savings on its acquisition of Alcon. The purchase will lead to savings of $350 million a year 2013, the Basel, Switzerland-based drugmaker said in a statement today.

Transocean Ltd., the largest offshore oil driller, added 4.2 percent to 49.02 francs. Oil rose for a second day in New York on speculation crude stockpiles shrank last week in the U.S. as storms curtailed offshore production.

Adecco jumped 3.1 percent to 33.70 francs as hotel and human-resources company Accor SA said it’s targeting 2011 earnings before interest and taxes of 510 million euros ($697 million) to 530 million euros after a promising summer season in all regions.

--Editors: Jennifer M. Freedman, Andrew Rummer

To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net