Stocks in Europe and Asia Advance; U.S. Index Futures Increase

By Sarah Jones

July 23 (Bloomberg) -- Stocks rose in Europe and Asia and U.S. index futures climbed as oil retreated, concerns eased that bank losses will expand and better-than-estimated earnings from Volkswagen AG and PSA Peugeot Citroen lifted automakers.

Air France-KLM Group and DSG International Plc led airlines and retailers higher after oil traded below $126 a barrel. UBS AG and HSBC Holdings Plc rose after Deutsche Bank AG said yesterday that financial companies are overcoming credit losses. Macquarie Group Ltd., Australia's biggest securities firm, advanced after saying it made a ``solid'' start to the year. Yahoo! Inc. jumped in German trading.

The MSCI World Index added 0.5 percent to 1,384.42 at 1:58 p.m. in London as four of 10 industry groups increased. Futures on the Standard & Poor's 500 Index rose 0.5 percent. India's Sensitive Index jumped 5.9 percent after Prime Minister Manmohan Singh's government retained the support of parliament.

``There are still some reassuring elements'' in the market, said Amandine Gerard, a Paris-based fund manager at Richelieu Finance which oversees $6.2 billion. ``Oil declining is the first. The market was also very worried about earnings at banks. All have reassured about solvency.''

The MSCI World has tumbled 13 percent this year as record oil prices, accelerating inflation and more than $467 billion in credit-related losses threatened to push the U.S. into recession.

Europe's Dow Jones Stoxx 600 Index advanced 1.8 percent today, as British Airways Plc, Debenhams Plc and STMicroelectronics NV climbed. The MSCI Asia Pacific Index increased 1.5 percent.

Investor Confidence

Crude fell for a second day as forecasters said Hurricane Dolly will miss fields in the Gulf of Mexico and the dollar rebounded, curbing investments in commodities.

The contract for September delivery fell as much as 2.4 percent to $125.35 a barrel on the New York Mercantile Exchange. The oil price yesterday tumbled 2.6 percent.

``The more the oil price falls the more confident you can become that inflation will be reduced and interest rates will come down,'' said Jane Coffey, head of equities at Royal London Asset Management, which oversees about $63 billion.

Air France, Europe's biggest airline, climbed 5.3 percent to 16.79 euros. British Airways Plc, the region's third-largest airline, jumped 4.4 percent to 257 pence.

DSG, the U.K.'s biggest consumer-electronics retailer, climbed 7.2 percent to 48.5 pence. Debenhams, the second-largest U.K. department-store company, jumped 12 percent to 45.5 pence.

UBS, the European bank hardest hit by the subprime contagion, climbed 4.4 percent to 22.94 francs. HSBC, Europe's biggest bank by assets, rose 2.6 percent to 834.75 pence.

Quelling Fears

Deutsche Bank analyst Mike Mayo said yesterday bank losses haven't spread as ``much as feared'' and that he's less ``negative'' on bank earnings.

Financial firms have led a rout that has erased about $13 trillion in value from global equities since October as credit losses and asset writedowns by the subprime-mortgage market's collapse spread, curbing the outlook for profit growth.

Better-than-expected earnings from Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. have sparked a rally in global financial stocks in the past week.

The MSCI World Financials Index has climbed 16 percent in six days after closing at the lowest since 2003 on July 15.

Macquarie gained 12 percent to A$52 in Sydney. Chief Executive Officer Nicholas Moore said ``Macquarie's businesses are performing relatively well despite market conditions deteriorating since this time last year,'' according to a statement before an annual shareholder meeting in Melbourne.

Banks worldwide have raised $345 billion to offset losses stemming from the financial-market turmoil and slowdown in lending.

Fannie, Freddie

Fannie Mae gained $1.58 to $14.99 in Germany, and Freddie Mac added 93 cents to $10.63. The House of Representatives is set to vote today on a rescue plan for the biggest U.S. mortgage-finance companies, said Representative Barney Frank, a Massachusetts Democrat who chairs the House Financial Services Committee.

State Bank of India, the nation's largest lender, gained 7.4 percent to 1,506.9 rupees. Prime Minister Singh yesterday won the country's first confidence motion in a decade, giving him the support needed to revive stalled policies.

Volkswagen advanced 4.9 percent to 205.60 euros. Europe's largest carmaker said second-quarter profit rose 35 percent to 1.64 billion euros ($2.58 billion) on sales of the Tiguan compact sport-utility vehicle and new car models. Seven analysts surveyed by Bloomberg News had estimated profit of 1.29 billion euros. Sales rose 4.5 percent to 29.5 billion euros.

Peugeot

Peugeot jumped 7.9 percent to 34.46 euros after Europe's second-biggest carmaker reiterated its 5 percent sales growth target and 3.5 percent operating-margin goal for the full year.

The company posted a 49 percent increase in first-half profit to 733 million euros, aided by cuts in production costs and buoyant demand for its new 308 compact and 207 small car. Analysts had expected net income of 674 million euros.

Fiat SpA gained 9.9 percent to 11.46 euros. Italy's largest manufacturer said second-quarter profit rose 1.9 percent to 604 million euros as higher sales in Brazil offset a slump in its home market. That beat the median forecast of 594 million euros in a Bloomberg survey.

Analysts estimate earnings for companies in the Stoxx 600 will drop 2.4 percent in 2008, Bloomberg data show. That's down from 11 percent growth predicted at the start of the year.

Profit at S&P 500 companies fell 16 percent in the second quarter, the fourth straight decline, according to analysts' estimates. That would be the longest streak in six years, Bloomberg data show.

Yahoo

Yahoo advanced 52 cents to $21.92 after reporting sales that met the company's forecasts from April. The Internet company that added activist investor Carl Icahn to its board yesterday said sales, excluding fees passed on to partner sites, rose 8.2 percent to $1.35 billion, compared with the $1.38 billion average of estimates compiled by Bloomberg.

STMicroelectronics advanced 4.2 percent to 7.05 euros. Europe's largest chipmaker forecast third-quarter revenue that met analysts' estimates, bolstered by sales of chips used in mobile devices.

Sales will climb between 7 percent and 14 percent from a year earlier. The midpoint of that range equates to $2.45 billion, the average of analysts' estimates in a Bloomberg survey.

Vodafone Group Plc gained 1.1 percent to 130.35 pence after the world's largest mobile-phone company said it will start a 1 billion-pound ($2 billion) stock buyback because the shares are ``significantly'' undervalued after a 14 percent drop yesterday.

Friends Provident Plc and Standard Life Plc led insurance companies higher after Goldman Sachs Group Inc. rated the insurers ``buy'' in new coverage.

The brokerage also added Friends Provident, a 176-year-old British insurer, to its ``conviction buy'' list. The shares jumped 9.9 percent to 88 pence. Standard Life increased 4.6 percent to 227 pence.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.