European and Asian Stocks Advance; U.S. Index Futures Gain

By Sarah Thompson

Nov. 21 (Bloomberg) -- Stocks rose in Europe and Asia and U.S. index futures gained as the Dow Jones Stoxx 600 Index traded near their cheapest relative to earnings in at least five years and investors speculated Citigroup Inc. may sell part or all of itself.

Deutsche Bank AG, Germany's biggest bank, and Barclays Plc gained more than 3 percent. DSG International Plc rallied 16 percent after Credit Suisse Group AG recommended the retailer's shares following declines.

The MSCI World Index added 0.6 percent to 776.23 at 8:18 a.m. in London as eight of 10 industry groups increased. Europe's Stoxx 600 advanced 0.3 percent, while the MSCI Asia Pacific Index added 3.2 percent.

Futures on the Standard & Poor's 500 Index advanced 3.9 percent before a possible meeting of Citigroup's board and on Dell Inc.'s better-than-expected earnings.

``A split of Citigroup was already rumored quite a while ago,'' said Philippe Gijsels, a Brussels-based senior equity strategist at Fortis Global Markets, which has $62 billion under management. ``I still think there is an upside between now and the end of the year because we are oversold. Maybe this is the start of this bear-market rally we have been waiting for.''

U.S. stocks slumped yesterday after economic reports depicted a deepening recession and lawmakers postponed a vote on a plan to salvage the auto industry. Chesapeake Energy Corp. and National-Oilwell Varco Inc. sank more than 21 percent.

More than $32 trillion has been erased from the value of global equities this year as the financial-market turmoil pushes countries from the U.K. to the U.S. and Japan into recession.

Citigroup

Citigroup's board meets today to discuss the bank's options, a person familiar with the matter said, after Chief Executive Officer Vikram Pandit's efforts to rebuild investor confidence failed to halt the stock's descent to a 15-year low.

The board, under Chairman Win Bischoff and lead independent director Richard Parsons, will meet at Citigroup's headquarters in New York, said the person, who declined to be identified because the deliberations are private. The panel may consider selling off pieces of the bank or the entire company, the Wall Street Journal reported, citing people familiar with the matter. The New York Times reported that bank executives are not actively considering selling or splitting the firm.

Barclays, the U.K.'s second-biggest bank, jumped 4.2 percent to 133 pence. Deutsche Bank, Germany's largest, gained 3.3 percent to 20 euros.

DSG jumped 16 percent to 12.5 pence after the U.K.'s largest electronics retailer was upgraded to ``outperform'' from ``underperform'' at Credit Suisse, which said concerns about the company's survival dragged the stock too low. The stock has lost 61 percent so far this month.

Valuations

``The risk of a near-term financial failure is in our view being over discounted by the market and we believe management will reassure on its financial position'' next week, Credit Suisse analyst Assad Malic wrote in a research note today.

The Stoxx 600 is valued at 8.3 times reported earnings of the companies in the index, below the four-year average of 14 times profit. The gauge traded at 7.9 times earnings in Oct. 27, the lowest since at least January 2002. The S&P 500 trades at 16 times earnings, the lowest since 1995. The MSCI World Index of 23 developed countries is valued at 11 times profit.

``People have way overestimated the difficulty that Europe is going to have,'' said Geoffrey Pazzanese, manager of the Federated InterContinental Fund, which invests in developed and emerging markets equities outside the U.S. Federated Investors, based in Pittsburgh, manages $344 billion. ``Everything has been priced for Armageddon. Valuations are very attractive. Pessimism will subside at some point.''

Aer Lingus

Aer Lingus Group Plc gained 4.6 percent to 1.03 euros after Ireland's second-biggest airline was added to Goldman Sachs Group Inc.'s ``conviction buy'' list, which said ``Aer Lingus is one of the few airlines where we believe full-year 2010 consensus estimates are now realistic.''

CRH Plc advanced 1.5 percent to 15.596 euros after the world's second-biggest building materials maker said it has completed the renewal and extension of its 1.5 billion euro debt facilities.

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