Stocks in Europe, Asia Advance; U.S. Futures Are Little Changed

By Sarah Thompson

July 17 (Bloomberg) -- Stocks in Europe and Asia rose, lifting the MSCI World Index to its biggest two-day gain since April, as concern eased credit losses will stifle profit growth and lower oil prices buoyed airlines and carmakers. U.S. index futures were little changed.

UBS AG, the European bank hit hardest by the subprime contagion and Royal Bank of Scotland Group Plc jumped the most in three months, while Kookmin Bank gained in Seoul. Ryanair Holdings AG and Air China Ltd. advanced after oil had the sharpest two-day drop since January 2007. Novartis AG climbed after the drugmaker's profit beat analysts' estimates.

``We're seeing more optimistic elements,'' said Virginie Robert, a managing director at Raymond James Asset Management International in Paris. ``We've had a drop in oil. Earnings have been more favorable. The weakening in the second quarter is less than expected.'' Raymond James oversees $35 billion worldwide.

The MSCI World added 0.7 percent to 1,346.76 at 9:26 a.m. in London, advancing 1.7 percent in two days. The gains have cut this year's decline to 15 percent after better-than-expected profit from Wells Fargo & Co. yesterday helped restore confidence in financial stocks, the world's worst performers this year. The MSCI World Financials Index is valued at 9.7 times the earnings of its companies, the cheapest in at least 13 years, according to weekly data compiled by Bloomberg.

``In the short term, banks look oversold,'' said Lawrence Peterman, investment director at Eden Financial Ltd. in London. ``They are still not out of the woods in terms of earnings outlook and credit-market issues.''

JPMorgan, Merrill

Futures on the Standard & Poor's 500 Index slipping less than 0.1 percent before JPMorgan Chase & Co., Merrill Lynch & Co., Coca-Cola Co., International Business Machines Corp. and Microsoft Inc. report earnings today. U.S. stocks rallied yesterday after Wells Fargo's earnings sparked the biggest-ever gain in financial shares.

Europe's Dow Jones Stoxx 600 Index advanced 1.6 percent today, while the MSCI Asia Pacific Index climbed 1.4 percent.

More than $14 trillion has been wiped off the value of global equities since October as $423 billion in credit-related losses prolong the global economy's slump and rising commodity prices stoke inflation.

The MSCI World entered a bear market last week as oil rose to a record and the U.S. Treasury moved to shore up Fannie Mae and Freddie Mac. If history is a guide, the benchmark index may fall another 13 percent, based on the average decline of seven bear markets since 1969, according to data compiled by Birinyi Associates Inc. and Bloomberg.

Earnings Outlook

Analysts estimate profit for companies in the Stoxx 600 will decline 2.3 percent in 2008, Bloomberg data show. That's down from 11 percent growth predicted at the start of the year.

Companies in the Standard & Poor's 500 Index, the benchmark for U.S. equities, will report a 14 percent fall in second- quarter profits, according to estimates of analysts compiled by Bloomberg. The quarter is expected to cap a full year of declining earnings, the longest profit slump since 2002.

UBS jumped 6.6 percent to 20.18 francs. Royal Bank, the U.K.'s second-biggest bank, climbed 8.5 percent to 179 pence. BNP Paribas SA, France's largest, rose 3.7 percent to 57 euros.

Kookmin, South Korea's largest bank, gained 1.9 percent to 52,800 won. Mitsubishi UFJ Financial Group Inc., the No. 1 Japanese bank by value, gained 3 percent to 955 yen.

Ryanair, Europe's largest discount airline, climbed 3.1 percent to 3.02 euros. Daimler AG, the world's second-biggest luxury carmaker, jumped 3.4 percent to 38.77 euros.

Air China, the nation's largest international carrier, rallied 5.8 percent to HK$4.18 in Hong Kong.

Oil fell $4.14, or 3 percent, to settle at $134.60 a barrel yesterday. Prices dropped 7.3 percent in the past two days. It traded down 99 cents today.

Novartis, Danone

Novartis rallied 2.4 percent to 58.8 francs. The maker of the Diovan heart pill said second-quarter profit rose 17 percent to $2.27 billion as the Swiss company sold more of the cardiovascular drug and the Gleevec cancer medicine. That beat the $2.14 billion median estimate of nine analysts surveyed by Bloomberg. Sales jumped 14 percent to $10.72 billion.

The shares may climb as much as 2.4 percent, according to pre-market trading at Clariden Leu.

Groupe Danone SA increased 2.8 percent to 43.46 euros. Sanford C. Bernstein & Co. analysts, including Andrew Wood, raised the shares to ``outperform'' from ``underperform,'' saying Danone has ``outstanding prospects for attractive growth and, for the first time in a very long while, in our view, an attractive valuation.'' The stock has fallen 29 percent this year.

Nokia Oyj, the biggest maker of mobile phones, rose 1.3 percent to 15.96 euros before reporting earnings today. Second-quarter revenue probably rose 1.8 percent to 12.8 billion euros ($20.5 billion) from a year earlier, according to the average estimate of 33 analysts in a Bloomberg survey. Net income may drop 56 percent from a year earlier, when profit was helped by a gain from the creation of Nokia Siemens Networks.

The company is scheduled to release results at 11 a.m. London time.

Cable & Wireless

Cable & Wireless Plc rose 3.9 percent 161.7 pence. Lehman Brothers Holdings Inc. upgraded the stock to ``overweight'' from ``equal weight'' after the U.K.'s second-biggest phone company said it might buy Scottish phone company Thus Group Plc.

``Shares have performed only in line with the telecom sector since the potential acquisition of Thus was first announced at the end of May,'' London-based analysts Graeme Pearson and Andy Parnis wrote in a report dated today. ``Thus would be additive to Cable & Wireless's existing plans for value realization in the second half.''

To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.