By Adam Haigh
Dec. 16 (Bloomberg) -- U.S. stock-index futures and European shares climbed as speculation the Federal Reserve will reduce interest rates to the lowest level on record overshadowed concern the deepening recession will drag down profits.
General Motors Corp. rose 4.4 percent on optimism that the Bush administration will soon finalize a bailout for GM and Chrysler LLC. Siemens AG and BASF SE added more than 3 percent, leading an advance among European companies that make at least one-fifth of their sales in North America, as investors waited for confirmation that the Fed will also channel credit to businesses and customers.
Europe’s Dow Jones Stoxx 600 Index increased for the first time in four days, adding 0.2 percent to 197.86 at 2:01 p.m. in London, while futures on the Standard & Poor’s 500 Index gained 0.9 percent. Fed Chairman Ben S. Bernanke has indicated he may take new steps to prevent the worst recession in a quarter century from turning into a depression.
“It is a question of what the Fed says with regard to the economy and quantitative easing,” said Gregor Smith, a London- based fund manager at Daiwa Asset Management, who helps oversee $1 billion. “We have become a bit more positive than a couple of weeks ago because we think we might see a bit of a bear-market rally in the short term.”
U.S. futures and European shares pared some of their gains after a report showed U.S. builders broke ground in November on the fewest new homes since record-keeping began, signaling the housing slump will extend into a fourth year.
Goldman Earnings
Earlier Goldman Sachs Group Inc. reported a fourth-quarter loss of $2.12 billion, the first since the company went public in 1999, as asset values and investment-banking fees declined. Goldman shares advanced 2.8 percent to $68.32.
The MSCI Asia Pacific Index lost 0.8 percent as raw-material producers slumped with metals prices.
The MSCI World Index of 23 developed countries dropped 44 percent in 2008 as almost $1 trillion in losses and writedowns at financial firms froze credit markets and sent the U.S., Europe and Japan into the first simultaneous recessions since World War II.
The Fed’s Open Market Committee will probably cut the benchmark rate in half, to 0.5 percent, according to the median of forecasts in a Bloomberg News survey. The central bank may also signal plans to channel credit to businesses and consumers by further enlarging its $2.26 trillion of assets. The FOMC, which began meeting yesterday, is expected to release its statement around 2:15 p.m. in Washington.
Trichet Comments
European Central Bank President Jean-Claude Trichet said there’s a limit to how far the bank can cut interest rates and signaled it may pause in January.
“Do we have a feeling there is a limit to the decrease in rates? At this stage certainly yes,” Trichet told journalists in Frankfurt late yesterday. The Stoxx 600 pared its advance after the comments were released this morning.
GM gained 4.4 percent to $4.26. The U.S. Treasury may adopt a plan that would let a car czar or the Treasury Secretary force GM and Chrysler into bankruptcy if the automakers don’t show they can survive without government aid, a U.S. senator said.
The two automakers would be required to submit viability plans by March 31 or lose any further U.S. support, Carl Levin, a Democrat from Michigan, told reporters in Detroit yesterday. The Treasury plan would resemble a measure passed by the U.S. House last week that was rejected by the Senate.
The administration may approve the loans today or tomorrow, Levin said. “Everyone knows it’s urgent,” he said.
Siemens, BASF
Siemens added 3.5 percent to 48.81 euros. Europe’s largest engineering company last year made more than 20 percent of its sales in the U.S. GlaxoSmithKline Plc, which derived 45 percent of revenue from the U.S., gained 3.6 percent to 1,226.5 pence.
BASF advanced 3.2 percent to 26.12 euros. The world’s biggest chemical producer makes more than 20 percent of its sales in North America.
The MSCI World Index has rebounded 15 percent since Nov. 20 as governments and policy makers around the world announced packages to revive economic growth. U.S. President-elect Barack Obama said he is planning the most extensive public-works spending package since the 1950s.
Shell, Europe’s largest oil producer, added 2.1 percent to 1,775 pence. Total, the region’s third biggest, gained 1.3 percent to 40.74 euros.
Crude oil rose after Venezuela’s oil minister said OPEC will reduce production by at least 1 million barrels a day in an effort to stem the 70 percent plunge in prices from July’s record.
Tullow Oil Plc, the U.K. explorer with the most licenses in Africa, rallied 8.1 percent to 617.5 pence after saying it may have made the largest oil and gas discovery in Uganda’s Butiaba region.
BHP, Rio
BHP Billiton, the world’s largest mining company, lost 1.8 percent to 1,238 pence, while Rio Tinto Group, the third-biggest, slipped 3.2 percent to 1,491 pence.
Copper slid 1.4 percent in London as stockpiles of the metal gained. Lead, tin and nickel also declined.
HSBC Holdings Plc slipped 2.8 percent to 703.5 pence after CLSA Asia-Pacific Markets said Europe’s largest bank may seek to raise about $14 billion as increasing bad-loan provisions erode profits. The bank may raise funds through a share placement or a rights offering, CLSA analysts led by Bangkok-based Daniel Tabbush said in a note to clients today. David Hall, a Hong Kong-based spokesman at HSBC, declined to comment on the report when contacted today.
Kesa Electricals Plc slipped 9.1 percent to 92.75 pence after reporting a first-half loss as sales of electronic goods stagnated. The owner of Darty electronics stores in France and Comet outlets in the U.K. also said the outlook for Europe remains “very weak.”
Macarthur Coal, the world’s biggest exporter of pulverized coal that’s used in steelmaking, plunged a record 22 percent to A$2.70 as it cut its profit forecast for the six months to Dec. 31 in half. The company also suspended its dividend, citing a “sudden and unprecedented” drop in coal sales.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
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