U.S. Stock-Index Futures Climb; Citigroup, General Motors Gain

By Daniela Silberstein

Feb. 23 (Bloomberg) -- U.S. stock futures rose, indicating the Standard & Poor’s 500 Index will rebound from two straight weeks of losses, as investors speculated the U.S. government may boost control over Citigroup Inc.

Citigroup surged 13 percent in German trading after the Wall Street Journal said the bank is in talks with federal officials that may result in the government holding as much as 40 percent of its common stock. Bank of America Corp. and JPMorgan Chase & Co. added more than 3 percent. General Motors Corp., the largest U.S. automaker, rallied 8.5 percent as the Journal said advisers are mulling a bankruptcy loan.

Futures on the S&P 500 expiring in March rose 1 percent to 777.5 as of 12:04 p.m. in London. Futures on the Dow Jones Industrial Average increased 1 percent to 7,427 after the index dropped to a six-year low on Feb. 20. Nasdaq-100 Index futures climbed 1.1 percent to 1,184.5.

“The news is positive in the sense that we won’t see a bankruptcy or an even worse catastrophe,” said Rudolf Buxtorf, a fund manager at RBS Coutts Bank in Zurich, who manages the equivalent of $114 million. “The government measures will prevent the world from going under.”

The S&P 500 last week extended its worst start to a year to 15 percent as President Barack Obama failed to assuage investors by approving a $787 billion economic stimulus plan that combines tax breaks and government spending meant to resuscitate the moribund U.S. economy. Homebuilders and banks retreated even after Obama announced a plan to stem home foreclosures.

Stocks in Asia and Europe rose today, with the MSCI Asia Pacific Index increasing 0.3 percent and the Dow Jones Stoxx 600 Index gaining 0.6 percent.

Citigroup Stake

Citigroup surged 13 percent to $2.20 in Germany. JPMorgan, the second-biggest U.S. bank, added 3.2 percent to $20.53.

The government may end up owning as much as 40 percent of Citigroup’s common stock, while the bank’s executives would prefer the stake to be closer to 25 percent, the Journal said. Citigroup spokesman Jon Diat declined to comment.

Bank of America climbed 8.2 percent to $4.10. The lender has enough “capital, liquidity and earnings power to make it through this downturn on our own,” Chief Executive Officer Kenneth Lewis, 61, said in a Jan. 20 memo to employees. The company isn’t talking with the government about expanding its ownership stake, spokesman Robert Stickler said yesterday.

Governments across the world are stepping up measures to stem the worst global recession since World War II. Bank of America and Citigroup have received a combined $90 billion in U.S. aid in four months.

Bank Debt

The cost of protecting against a default on senior and subordinated bank debt soared to a record in Europe, credit- default swap prices showed. The iTraxx Financial Index rose 5 basis points to an all-time high of 159, while the subordinated index climbed 15 to 315, according to JPMorgan prices.

The U.S. recession will be the worst in more than three decades as job losses mount and consumers and companies retrench, a survey of business economists showed. Billionaire investor George Soros said the current economic upheaval has its roots in the financial deregulation of the 1980s and signals the end of a free-market model that has since dominated capitalist countries.

GM increased 8.5 percent to $1.92 in Germany trading. Advisers to the U.S. Treasury have taken steps to arrange loans valued at least $40 billion for GM and Chrysler LLC, should the two automakers need the cash, the largest bankruptcy loan ever, the Wall Street Journal reported, citing unidentified people familiar with the situation.

General Electric

Ford Motor Co., the second-biggest U.S. automaker, added 0.6 percent to $1.59.

General Electric Co. advanced 2.8 percent to $9.64. The world’s biggest maker of power-generation equipment will double deliveries of wind turbines to Chinese customers for two years, benefiting from government-funded expansion, said Steve Fludder, head of GE’s environmental product campaign.

Loews Corp. rose 1.5 percent to $20.46. The diversified holding company may rally to almost $30 during the next year if financial markets stabilize and the value of the company’s assets recover, Barron’s reported, without citing anyone.

While the S&P 500 is trading at the lowest price relative to earnings since 1985 and all 10 Wall Street strategists tracked by Bloomberg forecast a rally this year, predictions based on dividends show shares are overvalued by as much as 46 percent. A total of 288 companies cut or suspended payouts last quarter, the most since Standard & Poor’s records began 54 years ago.

To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net.