Global Stocks, U.S. Index Futures Gain; ING, Ericsson Rally

By Adam Haigh

Oct. 20 (Bloomberg) -- Stocks rose in Europe and Asia and U.S. index futures climbed after India unexpectedly cut its benchmark interest rate, while South Korea and the Netherlands joined a global effort to bolster the banking system.

The MSCI World Index extended its biggest weekly gain since 2003, rising 1.3 percent. The AEX Index in the Netherlands, Japan's Nikkei 225 Stock Average and India's Sensex climbed more than 3 percent. ING Groep NV rallied 22 percent after receiving a 10 billion-euro ($13.4 billion) lifeline from the Dutch government. Citigroup Inc. gained 3 percent in German trading.

``All the authorities have taken the right steps,'' said Christian Dargnat, chief investment officer of BNP Paribas Asset Management, who helps oversee about $446 billion in Paris. ``The measures are going in a good direction to solve the problems of liquidity and solvency. We have probably seen the bottom of the market.''

Futures on the Standard & Poor's 500 Index expiring in December advanced 2.7 percent at 8:53 a.m. in London as Citigroup and Morgan Stanley climbed in Germany.

Europe's Dow Jones Stoxx 600 Index added 2.5 percent as Ericsson AB, the world's largest maker of wireless phone networks reported, gained 19 percent on better-than-estimated earnings. Prudential Plc climbed 13 percent on a report the U.K.'s second-biggest insurer is in advanced talks to sell a stake.

The MSCI Asia Pacific Index rose 3.6 percent. Hana Financial Group Inc., which controls South Korea's fourth- largest bank, surged 11 percent after the government guaranteed $100 billion of lenders' foreign-currency debts and provided $30 billion to banks.

The yen fell against the dollar as state-backed bank rescue plans helped ease concerns of a global credit crisis, encouraging investment in higher-yielding currencies.

Money Markets

Australian banks' borrowing costs fell to the lowest since before Lehman Brothers Holdings Inc. collapsed, according to a gauge measuring funding availability and the outlook for central bank interest rates.

The cost of borrowing dollars in London last week capped the first weekly decline since July. The London interbank offered rate, or Libor, for three-month loans in dollars dropped 40 basis points over five days, ending the week at 4.42 percent, the British Bankers' Association said. The BBA will announce today's Libor prices before noon in London.

European Central Bank President Jean-Claude Trichet said banks should start lending again after policy makers put them on ``the path'' of recovery.

``I expect the banks to normalize their relationships, meaning that they start lending to each other and that they lend to their clients,'' Trichet said in an interview on French radio RTL late yesterday. The banking system is ``on the path to normalization,'' he said.

Credit Losses

The MSCI World rallied 4.4 percent last week, trimming this year's slump to 40 percent, after governments injected $2 trillion to bail out banks to shore up the financial system and restore investor confidence. Credit losses and asset writedowns at financial firms worldwide have reached $660 billion, threatening to push the global economy toward a recession and wiping off about $30 trillion from the value of stock markets worldwide since October 2007.

ING jumped 22 percent to 8.96 euros. The Dutch government will buy non-voting preferred shares and appoint two representatives to the board of ING, which will scrap its final year dividend. ING fell a record 27 percent on Oct. 17 after predicting a 500 million-euro loss for the third quarter.

``It shows the Dutch government is ready to inject some confidence and this gives it some breathing space,'' said Matt Buckland, a trader at CMC Markets in London.''

Citigroup climbed 3 percent to $15.32 in Germany, and Morgan Stanley added 2.1 percent to $19.65.

Ericsson surged 19 percent to 58.60 kronor after reporting third-quarter net income of 2.8 billion Swedish kronor ($380 million) which beat the 2.34 billion-kronor estimate of analysts surveyed by Bloomberg. Citigroup Inc. reiterated its ``buy'' recommendation on the shares with a price estimate of 68 kronor after the report.

``It was a great surprise,'' said Mauritz Redin, Stockholm- b ased head of Swedish equities at Alfred Berg AB, which manages $27 billion in Nordic stocks, including Ericsson shares. ``Expectations were very low ahead of the report.''

Prudential

Prudential rose 13 percent to 306 pence after the Sunday Times reported the insurer is in advanced talks with investment funds in China and the Middle East to take a 20 percent stake in and help finance a $15 billion offer for the Asian business of American International Group Inc. The newspaper did not say where it got the information.

Royal Dutch Shell Plc and BHP Billiton Ltd. jumped more than 4 percent as oil gained for a second day in New York and copper increased 2.7 percent on London.

Shell, Europe's largest oil producer, added 4.9 percent to 18.89 euros, while Total SA, the region's third biggest, gained 4.2 percent to 37.96 euros.

Crude oil rose in New York on speculation OPEC will lower output in an attempt to halt a slide in prices, which have fallen more than 50 percent from July's record.

BHP, Rio Tinto

BHP Billiton, the world's largest mining company, added 3.5 percent to 927 pence and Rio Tinto Group, the third-biggest, climbed 5.7 percent to 2,379 pence. Copper rallied 2.4 percent in London.

Earnings for companies in the Stoxx 600 are forecast to drop 4.4 percent this year, compared with a 3.3 percent decline predicted a month ago, according to analysts' estimates compiled by Bloomberg. Analysts expected 11 percent growth in profit at the start of 2008, the data show.

The Stoxx 600 was valued at 8.9 times earnings of companies at the close of last week, near the cheapest on record. The MSCI World Index traded at 11.6 times the earnings of its 1,730 companies, and the S&P 500 was valued at 18.5 times profit, near the lowest in more than a year.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net