European Stock Futures Rally; HBOS, UBS, Barclays May Advance

By Adria Cimino

Sept. 17 (Bloomberg) -- European stock-index futures climbed after American International Group Inc. avoided the worst financial collapse in history by accepting an $85 billion government loan.

U.S. traded-shares of HBOS Plc, Britain's biggest mortgage lender, and UBS AG, the European bank with the highest subprime- related losses, advanced. Barclays Plc may gain after saying it will acquire the North American investment-banking business of bankrupt Lehman Brothers Holdings Inc. Energy shares including Total SA will probably rally after crude oil rebounded in New York.

Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, added 50, or 1.6 percent, to 3,134 at 7:25 a.m. in London. The U.K.'s FTSE 100 Index may increase 68, according to Cantor Index, a betting firm.

``The bailout of AIG is good news in the short term,'' Guillaume Duchesne, a Geneva-based equity strategist at Fortis Private Banking, which oversees the equivalent of $117 billion, said in a Bloomberg Television interview. ``We really needed this type of measure. AIG is crucial. To avoid a systemic risk, the government had to step in.''

U.S. stocks rose yesterday, helping the Standard & Poor's 500 Index recover from its steepest drop in seven years, on speculation AIG would weather the funding shortage. U.S. index futures and Asian shares were little changed.

AIG accepted a rescue that the gives federal government a majority stake in return for the loan.

The U.S. reversed its opposition to a bailout of the nation's biggest insurer by assets after private efforts failed and the Federal Reserve concluded that ``a disorderly failure of AIG could add to already significant levels of financial market fragility,'' according to a Fed statement.

The Fed kept the benchmark rate at 2 percent yesterday, citing risks to growth and inflation.

``It's going to be the U.S. government sponsored bailout of AIG that gives the markets something of a shot in the arm,'' Matthew Buckland, a dealer at CMC Markets in London, wrote.

HBOS, UBS

American depositary receipts of HBOS climbed 5.9 percent from the stock's close in the U.K. ADRs of UBS, Switzerland's biggest bank, gained 5 percent from the close in Zurich.

UBS said the cost of closing out its exposures to Lehman probably won't exceed $300 million.

Barclays, the U.K.'s third-largest bank, will buy the investment-banking unit for $1.75 billion, two days after abandoning plans to buy the entire firm.

Barclays ADRs added 5.2 percent from the stock's close in the U.K. yesterday.

Allianz SE, Europe's biggest insurer, said it has about 400 million euros ($568 million) of potential losses on investments related to Lehman, the U.S. securities firm that filed for bankruptcy this week.

Credit Agricole SA, France's third-largest bank, said it has less than 20 million euros of exposure to Lehman and holds no debt of the bankrupt U.S. investment bank.

Energy Stocks

ADRs of Total, Europe's biggest oil refiner, added 3.2 percent from the stock's close in France. ADRs of StatoilHydro ASA, Norway's largest oil and gas company, rose 3.8 percent.

Crude oil rebounded from its steepest two-day decline in almost four years after the rescue of AIG lowered the risk of further economic slowdown in the U.S. The contract for October delivery gained as much as 3.9 percent to $94.72 on the New York Mercantile Exchange.

Zodiac SA, the maker of airplane equipment, said first half sales fell to 2.01 billion euros from 2.48 billion a year ago as it sold its marine unit and the weaker dollar cut revenue.

Inditex SA, Europe's largest clothing retailer, reported profit growth slowed as a weakening Spanish economy and accelerating inflation hurt sales in the company's biggest market. First-half net income climbed 3.4 percent to 406.2 million euros, missing analysts' estimates.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.