Stocks Rise in Europe, Asia; MSCI World Heads for Weekly Gain
By Adam Haigh
Oct. 17 (Bloomberg) -- Stocks rallied in Europe and Asia, driving the MSCI World Index to its biggest weekly gain since 2003, on a possible government plan to bailout U.S. bond insurers and better-than-estimated earnings from Google Inc. U.S. index futures declined.
Societe Generale SA and UBS AG rose more than 4 percent after Ambac Financial Group Inc., the world's second-largest bond guarantor, said it will present a rescue plan to the Treasury Department. Carrefour SA gained 5.9 percent and Kesa Electricals Plc rose 7.7 percent after Goldman Sachs Group Inc. added the shares to its ``conviction buy'' list.
``We are seeing more positive sentiment after the U.S. gains last night,'' said Matt Buckland, a trader at CMC Markets in London. ``Google's figures were really good and this is helping sentiment not just in the technology sector. Everyone is breathing a sigh of relief after a tricky week.''
The MSCI World added 1.4 percent to 949.99 at 8:05 a.m. in London as all 10 industry groups increased. The index has climbed 4.6 percent from Oct. 10, the most since a 6.2 percent gain in the week ending March 21, 2003.
Europe's Dow Jones Stoxx 600 Index advanced 3.9 percent, while the MSCI Asia Pacific Index increased 1.3 percent. Standard & Poor's 500 Index futures expiring in December fell 0.5 percent.
U.S. stocks rallied for the first time in three days yesterday as oil's retreat below $70 a barrel sparked a rally in consumer companies. Financial shares and utilities led Asian markets higher today on signs governments are succeeding in efforts to unlock credit markets as the region's money market rates fell, set for weekly declines.
Credit-Default Swaps
The cost of protecting European corporate bonds from default dropped, according to traders of credit-default swaps. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings slid 17 basis points to 720, according to JPMorgan Chase & Co.
Concern the seizure in credit markets will trigger a global recession erased $27 trillion in value from stocks worldwide, dragging the Stoxx 600 down 43 percent this year. Financial firms reported $654 billion in losses and writedowns from mortgage-related investments since the beginning of 2007.
The Stoxx 600 has gained 4.5 percent so far this week, headed for its first gain in five weeks. The measure rallied 13 percent in the first two days this week, its biggest two-day surge on record, as central banks and governments injected $2 trillion to bailout banks and unlock the credit market.
Reports showing declines in U.S. retail sales and an increase in U.K. unemployment to the highest in since November 2006 drove shares lower in the past two days and sent the Stoxx 600 to its biggest two-day drop since the market crash of 1987.
SocGen, UBS
Societe Generale climbed 9 percent to 48.55 euros. UBS added 4.1 percent to 19.87 francs.
Ambac Chief Executive Officer Michael Callen said it is working with other bond insurers on a plan to send to the U.S. Treasury that would enable them to sell troubled assets to the government.
Google, owner of the most popular Internet search engine, reported profit that topped analysts' estimates, saying customers are still buying Web ads even as the economy slows.
Carrefour, Europe's largest retailer, advanced 5.9 percent to 26.145 euros. Kesa Electricals, the owner of France's Darty electronics stores and Britain's Comet chain, increased 7.7 percent to 90.5 pence.
Goldman Sachs added the shares to its ``conviction buy'' list citing recent share price declines.
Valuations
The Stoxx 600 was valued at 8.6 times earnings of companies Yesterday, near the cheapest on record. The MSCI World Index traded at 11.4 times the earnings of its 1,730 companies, and the S&P 500 was valued at 18.7 times profit yesterday, near the lowest in more than a year.
Saab AB dropped 4.4 percent to 88 kronor after the Swedish maker of the Gripen fighter plane reported a third-quarter net loss as customers delayed military projects and orders, prompting the company to deepen its planned cost cuts and eliminate 500 jobs.
Safran SA jumped 10 percent to 10.06 euros. Europe's second-biggest aircraft-engine maker said nine-month sales rose 1.5 percent, driven by higher shipments of aircraft equipment such as carbon brakes.
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