By Sarah Jones
Jan. 16 (Bloomberg) -- Stocks in Europe and Asia rallied, sending the MSCI World Index to its first gain in eight days, and U.S. futures rose after Bank of America Corp. received a $138 billion lifeline and Intel Corp. said profitability may rebound. UBS AG increased 3.7 percent as the U.S. government agreed to invest $20 billion more in Bank of America and guaranteed $118 billion of assets to help the lender absorb Merrill Lynch & Co. Citigroup Inc. rose 5.2 percent after saying it will split in two. Infineon Technologies AG and Hynix Semiconductor Inc. added more than 3 percent, while Intel gained 4.1 percent.
The MSCI World advanced 1.7 percent to 867.92 at 1:12 p.m. in London. The gauge of 23 developed nations had retreated 10 percent over the past seven days as companies from Deutsche Bank AG to Alcoa Inc. fuelled concern the global recession and financial crisis, which has seen banks and insurers rack up $1 trillion in credit losses and writedowns since the start of last year, are snuffing out profit growth.
“There is a little bit of confidence in the market,” said Richard Lacaille, chief investment officer at State Street Global Advisers, which has about $1.7 trillion under management. “It is a good sign that resolute action is taken because it’s evident that it’s needed,” he told Bloomberg Television.
Europe’s Dow Jones Stoxx 600 Index climbed 2.6 percent. The regional benchmark had posted its longest stretch of declines since 2004 as banks shares tumbled to a 12-year low on concern financial firms will need to raise more capital.
Yen, China Stimulus
The MSCI Asia Pacific Index climbed 2.1 percent as a weaker yen boosted Japanese electronics and auto producers. China’s CSI 300 Index gained 3.8 percent this week amid speculation the central bank will cut interest rates for the sixth time since September and the government will announce further measure to revive the economy.
China said today it’s enacting stimulus plans for nine industries including steelmakers, carmakers and shipbuilders as the world’s third-largest economy enters its deepest slowdown in almost two decades.
Futures on the Standard & Poor’s 500 Index rallied 1.4 percent, indicating the benchmark index for U.S. equities will trim its 5.2 percent weekly drop.
Ten-year Treasuries fell the most in almost two weeks on speculation government efforts to bail out U.S. banks and the economy will cause the deficit to balloon.
The pound rose for a third straight day, gaining against the euro, the dollar and the yen, as the U.K. government pledged to help struggling homeowners to pay their loans.
‘Commitment’
UBS, Switzerland’s largest bank, added 3.7 percent to 14 francs. Deutsche Bank, Germany’s biggest bank by assets, increased 2.5 percent to 21.28 euros. Bank of America gained 2 percent to $8.49 in early trade. The largest U.S. bank by assets posted its first loss since 1991 and cut the dividend today.
The U.S. government agreed to rescue Bank of America and Merrill Lynch “as part of its commitment to support financial- market stability,” the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement shortly after midnight in Washington.
Citigroup posted an $8.29 billion fourth-quarter loss, completing its worst year, as the credit crisis eroded mortgage- bond prices and customers missed more loan payments. Citigroup added 5.2 percent to $4.03 in early trading after saying it will split itself into two businesses.
Anglo Irish Bank
Anglo Irish Bank Corp. shares were suspended today after the government seized control in the wake of a scandal that claimed the chief executive officer, chairman and the nation’s financial regulator. Irish Finance Minister Brian Lenihan said late yesterday that a proposed 1.5 billion-euro ($1.97 billion) cash injection was “not now the appropriate and effective means to secure” the bank’s viability and that he was taking the “decisive step of public ownership.”
Infineon, Europe’s second-largest chipmaker, increased 3.6 percent to 87 cents. ASML Holding NV, the region’s biggest maker of semiconductor equipment, added 3 percent to 12.75 euros.
Hynix advanced 5.8 percent to 6,950 won in Seoul. Elpida Memory Inc., Japan’s largest memory chipmaker, soared 14 percent to 559 yen.
Intel, the world’s biggest chipmaker, yesterday said gross margin, or the percentage of sales remaining after taking out production costs, was 53 percent last quarter. That figure will be in the low 40s this quarter, marking the “trough,” Chief Financial Officer Stacy Smith said on a conference call. Intel gained 4.1 percent to $13.84 in early New York trading.
Metal Prices
Rio Tinto Group led a rebound in commodity producers after base metal prices advanced and the Financial Times reported the third-biggest mining company is not considering an emergency rights issue, citing Chief Executive Officer Tom Albanese.
Rio Tinto added 7.9 percent to 1,512 pence. Xstrata Plc, the fourth-largest copper producer, surged 7 percent to 749 pence.
Copper rose in London, trimming this week’s drop, as China’s biggest inventory slide in almost a year signaled declining supplies. Aluminum, lead, nickel and zinc also advanced on the London Metal Exchange.
Royal Ahold NV climbed 7.6 percent to 9.17 euros. The Dutch owner of Stop & Shop supermarkets in the U.S. said fourth-quarter sales rose 13 percent to 6.6 billion euros as shoppers responded to price cuts and a stronger dollar boosted revenue. That matched the median estimate of 16 analysts surveyed by Bloomberg News.
The benchmark index for European options, the VStoxx Index, dropped 15 percent to 47.87, the steepest slump since October. The gauge, which measures the cost of using options as insurance against declines in the Euro Stoxx 50 Index, surged to 87.51 in October, the highest since at least 2001, data compiled by Bloomberg show.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
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