By Adam Haigh
Nov. 4 (Bloomberg) -- Stocks advanced in Europe and Asia, sending the MSCI World Index to its sixth straight gain, after results from Clariant AG and Marks & Spencer Group Plc eased concern about profit growth, while money-market interest rates declined. U.S. index futures rose.
Clariant and Marks & Spencer rallied more than 9 percent after the companies reported earnings that topped analysts' estimates. Societe Generale SA gained 8 percent. Mizuho Financial Group Inc. climbed 7.1 percent as lending costs tumbled the most in almost a decade in Japan.
The MSCI World added 1.5 percent to 975.89 at 1:40 p.m. in London. The gauge for 23 developed countries increased six straight days for the first time since July, rallying 17 percent from a five-year low on Oct. 27. Europe's Dow Jones Stoxx 600 Index rose for a sixth day, jumping 2.5 percent, the longest stretch of gains since August 2007, when the credit crisis got under way.
``We have had some earnings at the top end of expectations which has helped sentiment,'' said Richard Hunter, head of U.K. equities at Hargreaves Lansdown Stockbrokers, a unit of Hargreaves Lansdown Plc, which has $21.5 billion in assets under management. ``Government intervention across the world is now starting to help and money-market rates are going in the right direction.''
Shares in Asia rose, led by financial companies, as Australia's central bank cut interest rates more than economists expected. Japan's Nikkei 225 Stock Average gained 6.3 percent as trading resumed following yesterday's holiday. Mitsubishi UFJ Financial Group Inc. and Westpac Banking Corp. gained.
Election Day
Futures on the Standard & Poor's 500 Index added 2.2 percent as voters in the U.S. go to the polls today to elect a new president. The winner between Democrat Barack Obama, who leads in national polls, and Republican John McCain must contend with an economy crippled by declining corporate profits and the highest unemployment in five years.
Profits for the 356 companies on the S&P 500 that have reported earnings since the end of the third quarter, including Boeing Co., the second-largest commercial planemaker, and AT&T Inc. have shrunk 10.6 percent, missing analysts' estimates by 0.2 percent, according to data compiled by Bloomberg News.
In western Europe, earnings for the 812 companies that reported results since Oct. 7 declined 4.2 percent on average, trailing expectations by 3.1 percent, Bloomberg data show. Companies from Nokia Oyj, the world's biggest maker of mobile phones, to BASF SE, the largest chemicals supplier, have reported earnings that missed analyst estimates.
Profit for companies in the Stoxx 600 will decline 6.8 percent in 2008, based on analysts' predictions compiled by Bloomberg. That's down from 11 percent growth predicted the start of the year.
`Bullish Tone'
Clariant, the world's biggest maker of chemicals used in printing ink, jumped 18 percent to 8.59 francs after reporting a third-quarter profit of 75 million Swiss francs ($64 million) as it closed factories and raised prices to pass on higher raw- material costs. Analysts predicted profit of 13 million francs in a Bloomberg survey.
Marks & Spencer climbed 8.8 percent to 241 pence. The U.K.'s largest clothes retailer reported net income of 223.2 million pounds ($350 million), beating the 211 million-pound median estimate of six analysts surveyed by Bloomberg News.
``You are seeing a slightly more bullish tone to the market'' after companies beat expectations, said David Buik, a market analyst at BGC Partners in London.
The Stoxx 600 has climbed 17 percent since Oct. 27 as central banks from the U.S. to Japan cut borrowing costs to revive economic growth. National benchmark indexes in Austria, Denmark, Greece, Ireland, Italy, Norway, Spain and Sweden have rallied at least 20 percent from their lows in October, the common definition of a bull market. All indexes are still down at least 30 percent this year.
Worst Year
Stocks in Europe are headed for their worst year on record, sending the Stoxx 600 down 37 percent so far in 2008, as a jump in U.S. mortgage defaults saddled global banks with $686 billion of losses and caused credit markets to lock up.
Societe Generale, France's second-biggest bank, added 8 percent to 45.725 euros. Allianz SE, Europe's biggest insurer, jumped 9.1 percent to 65.95 euros. Barclays Plc, the U.K.'s second-largest bank, rose 7.4 percent to 184.2 pence.
Mizuho, Japan's second-biggest bank by revenue, gained 7.1 percent to 248,400 yen. Mitsubishi UFJ, Japan's largest bank, climbed 4.9 percent to 627 yen.
Tokyo's three-month interbank rate, known as Tibor, slid 9.8 basis points to 0.791 percent, the biggest drop since December 1999. Japan's markets were shut yesterday for a holiday.
The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars dropped to the lowest level in almost five months. The rate declined 15 basis points to 2.71 percent.
Cutting Rates
Interbank rates have tumbled worldwide as central banks slashed borrowing costs and governments pledged as much as $3 trillion of emergency funds to kickstart lending.
Westpac, Australia's second-biggest bank by market value, rose 3.9 percent to A$22.30. Australian central bank Governor Glenn Stevens lowered the overnight cash rate target to 5.25 percent from 6 percent in Sydney today, adding to last month's 1 percentage point reduction. Fifteen of 16 economists in a Bloomberg survey forecast a half-point cut and one expected a quarter-point drop.
The European Central Bank and Bank of England are forecast to cut rates when they meet on Nov. 6.
The Stoxx 600 is valued at 9.5 times reported earnings of the companies in the index, below the average over the past four years of 14 times profit. The gauge was valued at 7.9 times earning on Oct. 27, the lowest since at least January 2002.
'Buy Signal'
European stocks are now showing a ``full house buy signal'' because they are already pricing in an ``earnings recession'' after a slump in the past 17 months, according to Morgan Stanley strategists.
Other than low valuations, the buy signals also include ``a capitulation among retail investors, purchasing managers and sell-side analysts,'' a team of strategists led by London-based Teun Draaisma wrote in a note dated Nov. 3.
Suez Environnement SA fell 2.3 percent to 15.58 euros after Goldman Sachs Group Inc. recommended selling shares in the company, citing the economic weakness. Goldman cut its recommendation on shares of Europe's second-biggest water company to ``sell'' from ``neutral.''
``Further signs of economic weakness and the impact this has on waste volumes could undermine Suez Environnement's share price relative to the sector,'' Andrew Mead, a London-based Goldman analyst, wrote in a note to clients.
Royal Bank of Scotland Group Plc, waiting to take up the U.K.'s biggest bailout, fell 6.9 percent to 60.7 pence after saying it will write down $206 million pounds of assets in the third quarter using new accounting rules that are less stringent.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
Read more...
Posts
