By Sarah Jones
Dec. 8 (Bloomberg) -- Stocks in Europe and Asia rallied, led by commodity producers, and U.S. index futures rose after President-elect Barack Obama pledged the largest spending on infrastructure since the 1950s to revive the economy.
CRH Plc, the world’s second-biggest building materials maker, and Siemens AG jumped more than 4 percent as Obama said he’s planning the largest public works program since President Dwight D. Eisenhower created the interstate highway system. General Motors Corp. surged 16 percent after U.S. lawmakers agreed in principle with the Bush administration on providing funds to prevent the collapse of GM and Chrysler LLC. BHP Billiton Ltd. and Royal Dutch Shell Plc advanced with copper and oil.
The MSCI World Index added 2.8 percent to 871.83 at 1:18 p.m. in London as all 10 industry groups increased. Standard & Poor’s 500 Index futures jumped 3.4 percent, and Europe’s Dow Jones Stoxx 600 Index gained 5.7 percent. The MSCI Asia Pacific Index rose 4.4 percent as India cut interest rates and unveiled a $4 billion stimulus plan.
Obama’s spending plan “is important in terms of it being another sign that policy response is ongoing and we should expect to see more from authorities through 2009,” said Robert Talbut, who helps manage $31 billion of assets as chief investment officer at Royal London Asset Management. “That should help restore confidence in equity markets.”
U.S. Treasuries declined and the yen fell against the euro as investor appetite for the safest assets decreased. The cost of protecting corporate bonds from default also retreated.
Profits for Free
Governments worldwide have introduced measures this year to buttress their economies from the worst financial crisis since the Great Depression as more than $31 trillion was erased from the value of global equities. Debt losses and writedowns by the world’s largest lenders and insurers have approached $1 trillion.
Stocks have fallen so far that 2,267 companies around the globe are offering profits to investors for free. That’s eight times as many as at the end of the last bear market, when the shares rose 115 percent over the next year.
Companies in the MSCI World trade for an average $1.17 per dollar of net assets, the lowest since at least 1995, and 39 percent sell at a discount to shareholder equity, data compiled by Bloomberg show.
CRH rallied 4.4 percent to 18.27 euros in Dublin and Germany’s Siemens, Europe’s largest engineering company, advanced 8.5 percent to 48.62 euros. Obama said on Dec. 6 he will boost investment in roads, bridges and public buildings to create and preserve 2.5 million U.S. jobs. Hochtief AG, Germany’s biggest builder, climbed 13 percent to 30.09 euros.
Dubai Concourse
Leighton Holdings Ltd., Australia’s largest construction company which is controlled by Hochtief, yesterday won a 4.9 billion dirham ($1.3 billion) contract to build a new concourse at Dubai Airport.
GM surged 16 percent to $4.75 in pre-market trading. U.S. lawmakers are working to hammer out details of legislation to bail out ailing auto companies after reaching an agreement in principle with the Bush administration.
The legislation is taking shape after House Speaker Nancy Pelosi dropped her opposition to drawing on $25 billion in funds from the Energy Department intended to help automakers develop more fuel-efficient vehicles, according to a Democratic aide who declined to be identified.
Daimler AG, the world’s second-biggest producer of luxury cars, gained 8.1 percent to 24.24 euros. Bayerische Motoren Werke AG, the largest luxury-car maker, climbed 4.1 percent to 20.63 euros.
Commodities Rally
BHP, the world’s largest mining company, climbed 11 percent to 1,078 pence as copper rallied on the London Metal Exchange. Xstrata Plc, the world’s fourth-biggest copper producer, increased 2.2 percent to 587.5 pence. Anglo American Plc jumped 12 percent to 1,385 pence.
Copper for delivery in three months rose for the time in eight days, reaching a high of $3,274. Commodities gained on speculation Obama’s public-works program will boost demand for raw materials.
Shell, Europe’s biggest energy producer, added 7.1 percent to 1,673 pence as crude oil rebounded in New York. Total SA, Europe’s third-biggest, increased 8.2 percent to 38.58 euros.
Oil snapped a six-day rout, with crude for January delivery climbing as much as 7.3 percent to $43.79 a barrel in after- hours electronic trading.
Eni SpA gained 10 percent to 16.93 euros after the Italian government said the Libyan Energy Fund is interested in buying a stake in Italy’s biggest oil company.
Il Sole 24 Ore reported yesterday Libya could buy as much as 10 percent of Eni for as much as 9 billion euros ($11.5 billion), citing Libyan Ambassador to Italy Hafed Gaddur.
Deutsche Boerse
Deutsche Boerse AG, which runs the Frankfurt stock exchange, rallied 9.2 percent to 55.10 euros after saying the company had considered a merger offer for NYSE Euronext, operator of the world’s largest stock market. Deutsche Boerse said the talks had “ended without any conclusion.”
HSBC Holdings Plc gained 4 percent to 738.25 pence after Europe’s largest bank said it will increase the amount of money it loans for U.K. home mortgages next year by 20 percent to 15 billion pounds ($22 billion).
The announcement came less than a day after the bank created a $5 billion fund to increase access to credit for small and medium-sized businesses.
Whitbread Plc rallied 7.6 percent to 820 pence after the owner of Premier Inn budget hotels reported stronger sales growth than some competitors and said it will reduce capital spending by a third next year.
Revenue rose 6.7 percent at outlets open at least a year in the 39 weeks ended Nov. 27. Whitbread said it will open fewer hotel rooms next year as part of plans to cut spending to about 200 million pounds.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
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