Stocks Climb in Europe, Asia, Led by Banks; U.S. Futures Fall

By Sarah Thompson

Oct. 29 (Bloomberg) -- Stocks rallied in Europe and Asia as lower financing costs signaled central bank efforts were unlocking credit markets, while higher commodity prices lifted energy and mining companies. U.S. index futures fell.

Deutsche Bank AG, Axa SA and Nokia Oyj rallied more than 8 percent. BHP Billiton Ltd. climbed in Australia as copper advanced for a third day. Royal Dutch Shell Plc gained 6.4 percent as oil rose for the first time in four days. Daimler AG surged 19 percent after Merrill Lynch & Co. said the carmaker's shares were ``oversold'' after a 45 percent slump this month.

The MSCI World Index added 2.4 percent to 913.88 at 8:10 a.m. in London, with all 10 industry groups advancing.Europe's Dow Jones Stoxx 600 gained 3.9 percent. The MSCI Asia Pacific Index rose 2.3 percent amid speculation Japan will cut interest rates and China take steps to boost equities. Standard & Poor's 500 Index futures slipped 2 percent today.

U.S. stocks climbed yesterday, sending the Dow Jones Industrial Average to its second-best point gain, as the lowest valuations in 23 years lured investors, while increased commercial paper sales and lower money-market rates signaled credit markets are thawing. The Federal Open Market Committee will announce its rate decision today.

``The Dow surged ahead of last night's close with the index coming close to posting a quadruple digit gain,'' Matt Buckland, a dealer at CMC Markets in London. ``There's no shortage of belief that the FOMC will cut interest rates by a further 0.5 percent later today so this is certainly helping spur interest in equities.''

Worst Since 1987

More than $12 trillion was erased from the market value of equities worldwide this month, accounting for about one-third of the total value wiped off stocks this year, as $680 billion of writedowns and losses by banks triggered a freeze in credit markets. The Stoxx 600 has retreated 22 in October, headed for its worst month since the October 1987 crash.

Money-market rates fell in Asia, with Hong Kong's three- month interbank offered rate, or Hibor, declined 30 basis points, the most in a week, on prospects for rate cuts.

U.S. Treasuries rose for the first time in three days on expectations the Federal Reserve will cut its key rate as much as 75 basis points today. Futures on the Chicago Board of Trade show a 46 percent chance the central bank will trim its target for overnight bank loans to 0.75 percent from 1.5 percent, as of late yesterday in New York. The odds increased from 34 percent a day before. The rest of the bets are for a half-point reduction.

Bank of Japan

Speculation the Bank of Japan will lower rates for the first time in seven years jumped after the Nikkei newspaper reported that the central bank may halve its target rate this week. Yoshihiro Sugimoto, chief press officer at the Bank of Japan, declined to comment on the Nikkei report.

Economic and Fiscal Policy Minister Kaoru Yosano said yesterday that a rate cut would have a ``symbolic'' effect if done in conjunction with other central banks. European Central Bank President Jean-Claude Trichet said Oct. 27 the bank may cut rates next week as the financial crisis damps inflation.

Deutsche Bank, Germany's largest, rose 14 percent to 25.30 euros. HSBC Holdings Plc, Europe's biggest bank, climbed 4.4 percent to 708 pence.

Axa, Europe's second-largest insurer, jumped 10 percent to 13.265. Nokia, the world's biggest mobile-phone maker, rallied 8.8 percent to 12.55 euros.

BHP Billiton, the world's largest mining company, gained 6.4 percent to 896.5 pence, while Rio Tinto Group, the third- biggest, rose 7.6 percent to 2,430 pence.

Copper for delivery in three months rose as much as 3.2 percent to $4,260 a metric ton, extending yesterday's 2.7 percent gain.

Oil Rebounds

Shell, Europe's largest oil company, rose 6.4 percent to 1,625 pence. Total SA, the region's third-biggest, ended 5.8 percent to 39.87 euros.

Crude for December delivery climbed as much as $3.98, or 6.3 percent, to $66.71 a barrel on the New York Mercantile Exchange.

Daimler surged 19 percent to 23.03 euros after Merrill upgraded the stock ``buy'' from ``neutral.''

``Any improvement in the macro outlook, debt market outlook, or even any progress on a further Chrysler disposal could lead to some bounce-back in Daimler shares,'' London-based analyst Harald Hendrikse wrote in a note to clients today. ``Daimler shares are discounting a lot.''

Daimler's relative strength index, a technical measure used by some analysts to predict moves, closed at 27.46 yesterday. A reader below 30 indicates the stock may rise, according to the analysts.

Volkswagen

Volkswagen AG tumbled 41 percent to 561.01 after Porsche SE said it will take steps to help smooth the carmaker's share price and Deutsche Boerse AG reduced the stock's weighting in the DAX Index after the shares surged more than fourfold in the past two days.

``Porsche SE intends -- depending on the state of the market -- to settle hedging transactions in the amount of up to 5 percent of the Volkswagen ordinary shares,'' the carmaker said in a statement to the German stock exchange today. ``This may result in an increase in the liquidity of the Volkswagen ordinary shares,'' said Porsche, the maker of 911 sports cars.

Deutsche Boerse lowered Volkswagen's weighting in the DAX, the benchmark for German stocks, to 10 percent.

Bayer

Bayer AG surged 11 percent to 42.47 euros. Germany's largest drugmaker confirmed its sales and earnings forecast for the year.

Investors speculating on a rebound in U.S. stocks may have a better chance in the first year of a Barack Obama presidency than a John McCain administration, if election history is any guide.

Since 1900, the Dow Average rose 9.8 percent in the 12 months after the Democratic Party captured the White House, based on the median change following the election of seven Democrats from Woodrow Wilson to Bill Clinton. Only twice did the average decline, after Wilson's victory in 1912 and Jimmy Carter's in 1976.

To contact the reporters for this story: Sarah Thompson in London at sthompson17@bloomberg.net;