Global Stocks, U.S. Futures Rise as IBM, Dexia Rally; Yen Falls

By Sarah Thompson

Oct. 9 (Bloomberg) -- Stocks climbed in Europe and Asia and U.S. index futures rose after International Business Machines Corp. reaffirmed its profit forecast and investors speculated the worst five-day plunge since 1987 was overdone. The yen and Treasuries fell.

IBM, the world's biggest computer-services company, jumped 5.3 percent as earnings topped analysts' estimates. Dexia SA surged 24 percent after Belgium, France and Luxembourg agreed to provide guarantees on borrowings of the world's largest lender to local governments. The yen dropped as low as 139.70 against the euro, the steepest decline in almost eight years after central banks from Hong Kong to Frankfurt and Washington cut interest rates in the past two days.

The MSCI World Index added 0.7 percent to 1,010.68 at 12:40 a.m. in London. The index lost 15 percent in the previous five days, the biggest drop since October 1987. The sell-off left shares in the measure at their cheapest relative to earnings in more than a decade. Standard & Poor's 500 Index futures gained 2.1 percent today.

``Valuations look attractive,'' said Espen Furnes, an Oslo- based fund manager at Storebrand Asset Management, which has the equivalent of $48 billion. ``It's time for a rebound, the stock market has just fallen too rapidly. IBM's numbers show that it's not all doom and gloom out there.''

Industrial & Commercial Bank of China Ltd. and South Korea's LG Electronics Inc. climbed more than 4 percent. BHP Billiton Ltd. led mining shares higher, jumping 10 percent as copper rallied from the lowest in 2 1/2 years.

Yields on two-year notes increased 17 basis points to 1.73 percent, according to BGCantor Market Data.

`Long Road Ahead'

``The coordination involved in yesterday's rate cuts was impressive but there is a long road ahead and the terrible state of the global economy will dominate market activity until confidence returns,'' said Jason McNab, who helps manage $2 billion at Duet Asset Management Ltd. in London.

The European Central Bank offered banks as much cash as they need for six days, bringing forward new auction measures as policy makers step up efforts to unlock credit markets.

The cost of borrowing in dollars for three months jumped to the highest level since December, the British Bankers' Association said today.

Iceland suspended trading today until Oct. 13 after the government seized Kaupthing hf, the country's biggest.

Europe's Dow Jones Stoxx 600 Index advanced 1.4 percent, while the MSCI Asia Pacific Index rose 0.9 percent.

Russia's Micex Index rallied 13 percent, leading gains in developing countries. The MSCI Emerging Markets Index rose 3.3 percent to 624.07, the most in three weeks.

Emerging-market stocks are a ``wonderful opportunity'' for investors after their record slump, said Mark Mobius, executive chairman of Templeton Asset Management Ltd.

``There are bargains on almost every single market around the world,'' Singapore-based Mobius said in a Bloomberg Television interview from Rome.

Valuations

The MSCI World was valued at 12.01 times the reported earnings of companies in the index yesterday, the cheapest since at least 1995. Europe's Stoxx 600 was valued at 9.44 times profit, the cheapest since Bloomberg began compiling the data in January 2002. The S&P 500 traded at 18.82 times earnings.

IBM climbed $4.75 to $95.30 after saying profit for the year will be at least $8.75 a share, reaffirming a previous forecast. Earnings last quarter increased to $2.05 a share, excluding some items, the company said. That topped the $2.01 average estimate of analysts in a Bloomberg survey.

Cap Gemini SA, Europe's largest computer-services company, climbed 6.1 euros to 26.78 euros. Atos Origin SA, France's second-largest computer-services provider, rose 2.2 percent to 25.39 euros. Logica Plc, the Anglo-Dutch computer-services provider, advanced 2.1 percent to 87 pence.

Reassuring Investors

``IBM's statement provides some reassurance to investors,'' said Jesper Kruger, a fund manager in Copenhagen at ATP, which has about $64 billion. ``Not only does IBM have a broad exposure across the tech sector, but financial services makes up around 28 percent of its business.''

BHP Billiton, the world's largest mining company, rallied 12 percent to 1,089 pence. Rio Tinto Group, the third-biggest, climbed 11 percent to 2,918 pence. Copper, lead and zinc gained in London.

Dexia jumped 1.19 euros to 6.18 after Belgium, France and Luxembourg said they will back the company's new borrowings. The governments threw Dexia a 6.4 billion-euro ($8.8 billion) lifeline last week to prevent the company's collapse. Belgium said today the nation's other banks will be eligible for the same guarantee on borrowings.

KBC Group NV, Belgium's biggest financial-services company by market value, climbed 2.6 percent to 44.11 euros.

Trichet on Rates

Banks also rallied after European Central Bank President Jean-Claude Trichet said yesterday he can't rule out further rate cuts. ECB council member Erkki Liikanen said today the bank is seeing signs that inflation expectations are settling close to its 2 percent target.

UBS AG, the European bank hardest hit by credit losses, rose 7.1 percent to 19.51 francs. Deutsche Bank AG, Germany's biggest bank, climbed 8.3 percent to 42.165 euros.

Royal Bank of Scotland Group Plc jumped 18 percent to 106.9 pence after Citigroup Inc. upgraded shares of U.K. banks, citing ``underperformance'' and actions by central banks and the government yesterday. RBS is down 43 percent so far this week.

Citigroup raised its recommendation on U.K. banks to ``neutral'' from ``underweight.'' The government yesterday announced a 50 billion-pound ($87 billion) rescue package for the nation's banks.

ICBC, China's largest bank, gained 6.6 percent to HK$4.05 in Hong Kong. LG Electronics, Asia's second-biggest mobile-phone maker, rose 4.8 percent to 109,500 won in Seoul.

China, South Korea, Hong Kong and Taiwan lowered borrowing costs. The cuts followed coordinated rate reductions yesterday by the Federal Reserve, ECB, Bank of England, Bank of Canada and Sweden's Riksbank.

Aviva

Aviva Plc surged 8.8 percent to 445.75 pence after the U.K.'s biggest insurer said it has a ``strong'' capital position following the turmoil in global financial markets. The insurer has surplus capital to meet regulatory requirements of 1.9 billion pounds, the company said.

Nokian Renkaat Oyj climbed 4.6 percent to 14 euros after Merrill Lynch & Co. recommended shares of the world's most profitable publicly traded tiremaker. Shares of the tiremaker have dropped more than 60 percent from highs reached in May and June, Merrill analyst Thomas Besson wrote in a research note dated today.

Johnson Matthey Plc rallied 6.1 percent to 1,156 pence after the maker of a third of all autocatalysts to control vehicle pollution was raised to ``buy'' from ``neutral'' at UBS on its underlying financial strength.

Johnson Matthey has a ``solid balance sheet with little financial risk'' and is ``trading at historical trough multiples,'' London-based analysts Laurent Favre, Thomas Gilbert and Jim Varas wrote in a note dated today.

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