By Sarah Jones
March 31 (Bloomberg) -- European stocks rebounded from the biggest drop in four weeks as Marks & Spencer Group Plc posted sales that beat analysts’ estimates and commodity producers climbed. U.S. futures advanced, while shares in Asia retreated.
Marks & Spencer, the U.K.’s biggest clothing retailer, increased 11 percent as confidence among British consumers also reached the highest level since May. Anglo American Plc rose 4.6 percent as copper gained. National Australia Bank declined 3.3 percent in Sydney as Australia’s central bank said the economy is likely to enter a recession.
Europe’s Dow Jones Stoxx 600 Index added 1.6 percent to 173.15 at 10:25 a.m. in London, erasing its March decline. The gauge has advanced 9.6 percent since March 9, reducing its quarterly decline to 13 percent, as banks from Citigroup Inc. to JPMorgan Chase & Co. said they made money in the first two months of 2009 and U.S. Treasury Secretary Timothy Geithner unveiled plans to rid financial firms of toxic assets.
“We have seen quite lot of indications that have stopped deteriorating, not so much at the company level but more on the economic front,” said Kevin Lilley, a London-based fund manager at Royal London Asset Management, which oversees $63 billion. “There is quite of lot of newsflow that is building a base for the market. Now it’s a case of what kind of recovery we can get.”
More Aid
The Stoxx 600 slid 3.8 percent yesterday, while the Standard & Poor’s 500 Index posted its biggest drop in three weeks as the Obama administration warned that some banks will need more government aid and General Motors Corp. and Chrysler LLC have one last chance to restructure. Futures on the S&P 500 added 1 percent today.
The MSCI Asia Pacific Index lost 1.2 percent, extending yesterday’s 4 percent slump. Prior to declines in the past two days, the gauge had rallied 14 percent through March, as governments from the U.S. and Japan widened measures to ease the financial crisis. That would have given the index its best month since October 1998.
Stock indexes around the world have rebounded after the MSCI World Index suffered its worst start to a year on record as governments pumped trillions of dollars into the financial system. The U.S. government and the Federal Reserve committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year. The MSCI World Index of 23 developed countries is down 14 percent for the quarter after losing 25 percent through March 9.
Marks & Spencer
Marks & Spencer climbed 11 percent to 294.75 pence. Revenue at U.K. stores open at least a year declined 4.2 percent in the fiscal fourth quarter. That beat the 6.8 percent drop estimated by 14 analysts surveyed by Bloomberg News.
Separately, U.K. consumer confidence increased to the highest level since May after the Bank of England cut interest rates to a record low, GfK NOP said. The researcher’s index of consumer confidence rose five points to minus 30 in March.
Anglo American, the world’s fourth-largest diversified mining company, added 4.6 percent to 1,131 pence. Copper rose on the London Metal Exchange, leading industrial metals higher.
ICAP Plc advanced 5.5 percent to 288 pence. The world’s largest broker of transactions between banks said revenue for the year exceeded 1.5 billion pounds ($2.14 billion) for the first time.
Fiat SpA climbed 9.1 percent to 5.21 euros. Chrysler LLC and Cerberus Capital Management LP have a “framework” of an alliance with Fiat, the U.S. automaker said. The revised accord calls for an initial Fiat stake of 20 percent, said a person familiar with the plans, who didn’t want to be identified because they aren’t yet public.
Porsche Drops
Porsche SE slid 4.5 percent to 35.36 euros even after the maker of the 911 sports car boosted first-half profit more than fourfold to 5.55 billion euros ($7.4 billion) on gains from an increased stake in Volkswagen AG. Revenue declined 13 percent to 3.04 billion euros and vehicle deliveries tumbled 27 percent to 34,266.
Earnings at European companies may drop 55 percent from the peak before recovering “modestly” in 2010, according to Goldman Sachs Group Inc.
“This is significantly worse than the 25 percent peak-to- trough fall in the early 1990s and 46 percent in 2001-02,” strategists led by Peter Oppenheimer wrote in a report today. “The recovery we expect is lackluster compared with those previous periods, mainly reflecting slow volume growth and low price inflation.”
Profits will decline 38 percent this year and rise 19 percent in 2010, Goldman Sachs said.
Outlook for Banks
Deutsche Bank AG Chief Risk Officer Hugo Banziger said the credit crisis is “far from over” and global financial regulations must be overhauled to regain investor trust.
Separately, Morgan Stanley Chief Executive Officer John Mack told employees at Morgan Stanley and Citigroup Inc.’s Smith Barney unit that 2009 will be a “difficult year” and that profitability is nowhere near the bank’s targets. Deutsche Bank added 1.5 percent to 29.42 euros, while Morgan Stanley was little changed in Germany.
National Australia Bank, the nation’s biggest by assets, sank 3.3 percent to A$20.10. Stockland, the country’s biggest housing developer, tumbled 6.4 percent to A$3.09.
“There are limits on how much we can insulate ourselves from what is happening abroad, and therefore there are probably still some difficult times ahead,” Australia’s central bank Deputy Governor Ric Battellino said today. Gross domestic product is “likely to fall in 2009,” he said.
Rally to End?
This month’s advance in global stocks will end because valuations still aren’t cheap enough to have marked a bottom and problems with mortgage-backed securities will weigh on the financial system, Deutsche Bank AG said.
The S&P 500, which surged 16 percent since March 9, is trading at 14 times earnings, based on 10 years of profits, according to data compiled by Yale University’s Robert Shiller.
The gauge needs to fall below 10 times to achieve a final bottom for a bear market, Brad Jones, a Hong Kong-based strategist at Deutsche Bank, wrote in a report dated yesterday. When the U.S. market crashed in 1929 there were eight rallies of 15 percent or more before the index reached a final nadir in 1932, according to Jones.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
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