Most European Stocks Rise, Led by ING, HBOS; U.S. Futures Gain

By Adam Haigh

Nov. 3 (Bloomberg) -- Most European stocks gained and Asian advanced, pushing the MSCI World Index higher for a fifth day, as declining money-market rates overshadowed evidence the global economy is slipping into a recession. U.S. index futures rose.

ING Groep NV, the Netherlands' biggest financial-services provider, added 3.5 percent, and Hannover Re, Germany's second largest reinsurer, climbed 6.5 percent as a leading money-market indicator slid to the lowest level since the collapse of Lehman Brothers Holdings Inc. HBOS Plc rallied 4.2 percent on speculation the mortgage lender may receive a rival bid to Lloyds TSB Group Plc's offer.

The MSCI World added 0.7 percent to 964.44 at 12:59 p.m. in London, as eight of the 10 industry groups increased. The gauge of 23 developed countries headed for the longest winning streak since July as money-market rates fell in Europe and Asia on speculation central banks will keep cutting interest rates to spur lending and shore up the economy.

``You are seeing some signs of the stress indicators, or interbank lending, are reducing,'' said Andrew Bell, head of research and strategy at Rensburg Sheppards Plc. ``Clearly liquidity is being provided from central banks and governments to show that the banks can continue to function. I don't think the bank bailouts are over, but what you have now is a belief that sufficient capital will be found to plug the holes.''

Europe's Dow Jones Stoxx 600 Index advanced less than 0.1 percent as almost three stocks rose for every one that fell. Futures on the Standard & Poor's 500 Index added 0.3 percent before tomorrow's presidential election.

Rate Cuts

The MSCI Asia Pacific excluding Japan Index rose 5.2 percent as South Korea pledged to pump $10.8 billion into its economy and India cut interest rates to ease the fallout from the global credit crisis. Japanese markets are shut for a holiday.

Shares in emerging markets gained, extending last week's record 20 percent surge for the MSCI Emerging Markets Index. Even so, some money managers expect a record $40 billion which has been pulled form emerging markets so far this year to grow further as economic growth deteriorates.

Europe's Stoxx 600 has climbed 14 percent in five days as central banks from the U.S. to Japan cut borrowing costs to revive economic growth.

Stocks pared gains after the European Commission today said the region's economy probably entered a recession in the third quarter and trimmed its growth forecast for this year to 1.2 percent from 1.3 percent. Manufacturing in the U.K. shrank for a sixth month in October, according to the Chartered Institute of Purchasing and Supply's index of manufacturing.

Worst Year

ING gained 3.5 percent to 7.49 euros, and Hannover Re added 6.5 percent to 20.94 euros.

Even after last week's gains, European stocks are headed for their worst year on record as a jump in U.S. mortgage defaults saddled global banks with more than $684 billion of losses and caused credit markets to lock up. The Stoxx 600 has tumbled 39 percent in 2008 and reached a five-year low on Oct. 27 when the gauge traded at 7.9 times reported earnings of the companies in the index, the cheapest level since at least January 2002, according to data compiled by Bloomberg.

The London interbank offered rate, or Libor, that banks charge for three-month loans in dollars dropped 17 basis points to 2.86 percent, the lowest level since the collapse of Lehman on Sept. 15.

$3 Trillion

Hong Kong's three-month interbank offered rate, or Hibor, declined 26.5 basis points today to a six-week low of 3.08 percent. The similar rate for U.S. dollar loans in Singapore, or Sibor, dropped 16 basis points to 2.93 percent, the lowest since Sept. 16, according to the Association of Banks in Singapore.

The decline in money-market rates signals as much as $3 trillion of emergency funds provided by governments to alleviate the credit crisis may be easing interbank lending. The cost of borrowing dollars for three months in London fell 49 basis points last week to 3.03 percent, capping the first monthly decline since May, according to the British Bankers' Association.

Taylor Wimpey Plc, the U.K.'s largest homebuilder, rallied 28 percent to 12.75 pence as investors bought shares to close short positions, betting the stock will benefit from an interest rate cut.

ECB Meeting

European Central Bank policy makers meet Nov. 6, when they will probably reduce the region's main refinancing rate a half point to 3.25 percent, a Bloomberg survey of economists showed. The Bank of England will also announce a cut in borrowing costs on the same day to 4 percent, a separate survey indicated.

HBOS, John Wood

HBOS rose 4.2 percent to 103.5 pence. Scottish financier Jim Spowart contacted Scottish Secretary Jim Murphy this past week about ``another potential bid,'' the Scottish Office said in a statement in London. For now, though, ``there is only one bid,'' it said. HBOS spokesman Shane O'Riordain declined to comment.

Edinburgh-based HBOS agreed to be bought in September after its shares plunged amid concerns with the company's access to cash as the credit crunch discouraged loans between banks.

Lloyds TSB agreed to buy HBOS in a government-assisted rescue.

John Wood Group Plc, the U.K.'s largest oilfield-services provider, gained 4.5 percent to 251 pence. UBS AG raised its recommendation on the shares to ``buy'' from ``neutral'' and separately Morgan Stanley upgraded the stock to ``equal-weight'' from ``underweight.''

Volkswagen

Volkswagen AG fell 15 percent to 425.04 euros after Deutsche Boerse AG limited the stock's weighting in the DAX Index to 10 percent after the close on Oct. 31 and said that from today it may at any time remove a DAX stock whose weighting exceeds 10 percent and whose share price over the preceding 30 trading days had annualized volatility of more than 250 percent. The carmaker currently comprises 8.5 percent of the gauge.

A report today may show manufacturing in the U.S. probably contracted in October at the fastest pace since the 2001 recession. The Institute for Supply Management's factory index dropped to 41.5 last month from 43.5 in September, according to the median estimate in a Bloomberg News survey. A reading of 50 is the dividing line between expansion and contraction.

Stocks may extend their gains if Barack Obama beats John McCain in tomorrow's presidential election if history is any guide.

Since 1900, the Dow Jones Industrial 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 reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net