By Sarah Jones
Nov. 25 (Bloomberg) -- Most European stocks rose on signs central banks will take further steps to revive the economy and keep the financial system from collapsing. U.S. index futures were little changed, while Asian shares advanced.
Royal Bank of Scotland Group Plc and Barclays Plc gained more than 5 percent after Bank of England Governor Mervyn King signaled he may take more steps to bolster the credit market. Citigroup Inc. advanced 4.5 percent on speculation the U.S. Treasury and Federal Reserve will unveil as soon as today a lending program to shore up the consumer-finance market.
Declines by mining shares and automakers left Europe's Dow Jones Stoxx 600 Index little changed, up 0.1 percent at 197.79 at 12:55 p.m. in London even as two stocks rose for every one that fell. The gauge yesterday rallied the most in six weeks after the U.S. government guaranteed $306 billion of troubled Citigroup assets and lawmakers pledged a stimulus package for the world's largest economy.
``There is some follow through today'' from Citigroup's bailout, said David Hussey, London-based head of European equities at MFC Global Investment Management, which has $220 billion in global assets. ``We are definitely seeing appetite for risk coming back in a very, very gradual way. Financials will lead a recovery in the market.''
Futures on the Standard & Poor's 500 Index slipped less than 0.1 percent after the index yesterday posted the biggest two-day rally since 1987. Asian equities today jumped, led by financials and commodity producers, following yesterday's rally in the U.S. and as trading resumed in Japan following yesterday's holiday.
Even after the gains, more than $31 trillion has been erased from the value of global equities this year as countries from the U.K. to Germany and the U.S. slipped into recession.
National Markets
National benchmark indexes rose in 12 of the 18 markets in western Europe. The FTSE 100 gained 0.2 percent, with BHP Billiton Ltd. rallying more than 13 percent after pulling its bid for Rio Tinto Group. Germany's DAX slipped 0.5 percent. France's CAC 40 increased 0.2 percent.
Royal Bank of Scotland, the U.K. bank waiting to take up the country's biggest bailout, rallied 6.7 percent to 54.2 pence. Barclays, which won shareholder support to raise 7 billion pounds ($10.5 billion), gained 5.3 percent to 154.2 pence.
The Bank of England's King said U.K. financial institutions may still need more capital and the ``single most pressing challenge'' facing policy makers is to revive the flow of credit through the economy.
``We may not have come to the end of recapitalization,'' King said in testimony to lawmakers in London. ``We should not shy away from that if that proves to be necessary.'' The Bank of England would have to cooperate closely with the Treasury if it was forced to cut its benchmark interest rate to zero, he said.
Consumer Finance
Citigroup climbed 4.5 percent to $6.22 in German trading. The Treasury and Fed may present as soon as today a program to shore up the consumer-finance market using money from the government's $700 billion rescue, two people familiar with the effort said. Treasury Secretary Henry Paulson is scheduled for a press conference at 10 a.m. New York time.
The Organization for Economic Cooperation and Development said the world's largest economies need further interest-rate reductions and tax cuts to limit the impact of the worst recession since the early 1980s.
``In normal times, monetary rather than fiscal policy would be the instrument of choice for macroeconomic stabilization,'' the Paris-based organization said in a report today. ``But these are not normal times.''
Treasuries rose before reports that may show U.S. consumer confidence stayed at a record low this month and the economy shrank more in the third quarter than the government previously stated.
Rio Tinto Bid
Rio Tinto, the world's third-biggest mining company, tumbled 39 percent to 1,497 pence after BHP, the world's biggest mining company, withdrew its $66 billion takeover.
``We have concerns about the continued deterioration of the near term global economic conditions,'' Don Argus, chairman of Melbourne-based BHP said in a statement to the Australian stock exchange. BHP rose 14 percent to 1,113 pence.
Mining stocks were Europe's worst performers today as BHP's withdrawal damped speculation of other mergers and acquisitions. The Stoxx 600 Basic Resources Index lost 4.7 percent, with three stocks retreating for each one that rose.
``Any thoughts of M&A activity in the sector might be quashed now,'' said Matt Buckland, a London-based dealer at CMC Markets.
Lonmin Plc, the world's third- largest platinum producer, fell 4.9 percent to 812.5 pence. Xstrata Plc, which earlier scrapped a planned hostile bid for Lonmin citing ``extreme'' financial-market turmoil, lost 4.4 percent to 772.5 pence.
Axa, Allianz
Axa SA fell 8.4 percent to 12.305 euros after the insurer cut its earnings forecast and said 2012 targets have become ``increasingly obsolete'' amid the financial crisis and global economic slowdown.
The Paris-based insurer said it expects its 2008 underlying profit to be between 3.6 billion euros ($4.62 billion) and 4.0 billion euros because of variable annuities costs and reduced commissions on assets.
Allianz SE, Germany's biggest insurer, lost 4 percent to 53.97 euros.
Swiss Reinsurance Co. fell 2.3 percent to 42.98 euros after the world's second largest reinsurer was downgraded to ``underweight'' from ``overweight'' at JPMorgan Chase & Co., which cited the ``risk of rating agency downgrade.''
Financial stocks have underperformed the market this year as analysts cut earnings estimates and credit losses and writedowns spread. Profit for the group in the Stoxx 600 will drop 50 percent this year, compared with a 12 percent decline for the overall market, estimates compiled by Bloomberg show.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
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