By Sarah Jones
May 8 (Bloomberg) -- European and Asian stocks and U.S. index futures rose as Federal Reserve Chairman Ben S. Bernanke said results of the government’s review of the banking industry’s health “should provide considerable comfort.”
Deutsche Bank AG and BNP Paribas SA climbed more than 3 percent, while Citigroup Inc. and Bank of America Corp. jumped at least 9 percent in early New York trading. U.S. banks need to raise a total of $74.6 billion in capital, a finding that Bernanke said should reassure investors about the soundness of the financial system. Royal Bank of Scotland Group Plc soared 13 percent as the lender reported higher revenue on “exceptional” growth at its global banking division.
The MSCI World Index added 0.5 percent to 938.63 at 10:52 a.m. in London, extending its weekly gain to 4.7 percent. The gauge of 23 developed countries has surged 36 percent since March 9 as earnings at companies from Credit Suisse Group AG to Ford Motor Co. beat estimates and optimism grew that the U.S. plan to purchase of illiquid assets from banks will pull the global economy out of its first recession since World War II.
"$75 billion is not a bad number, it is more or less what the market had been expecting,” said Marino Valensise, chief investment officer at Baring Asset Management Ltd. in London. “We probably have another 5 to 10 percent in this rally before things start to stabilize.”
Futures on the Standard & Poor’s 500 Index climbed 1.1 percent to 917. The benchmark index for U.S. equities lost 1.3 percent yesterday before the results of the so-called bank stress tests were released.
Europe, Asia
Europe’s Dow Jones Stoxx 600 Index rose 1.6 percent, bringing its weekly advance to 4.7 percent, the eighth gain in nine weeks. The MSCI Asia Pacific Index climbed 0.4 percent.
A report today showed German exports unexpectedly grew for the first time in six months in March, adding to signs a slump in Europe’s largest economy is bottoming out.
Deutsche Bank, Germany’s largest bank, climbed 4 percent to 41.43 euros, while BNP, France’s biggest, advanced 3.6 percent to 46.64 euros. Italy’s UniCredit SpA increased 5.1 percent to 2.09 euros.
“There’s certainly still a feeling of cautious optimism out there after the total capitalization call by the Fed for US banks came in at ‘only’ $75 billion,” said London-based Matt Buckland, a dealer as CMC Markets.
The Fed’s report on the health of the 19 largest U.S. lenders showed that losses at the banks under “more adverse” conditions than most economists anticipate could total $599.2 billion over two years.
Citigroup, Bank of America
Citigroup climbed 12 percent to $4.28 in pre-market trading as the Fed said the bank needs $5.5 billion in additional capital. Bank of America, determined to require $33.9 billion, gained 9 percent to $14.73.
Royal Bank of Scotland, which today reported a first- quarter loss of 857 million pounds ($1.29 billion), rallied 13 percent to 47.1 pence. The British bank posted a 26 percent jump in first-quarter revenue to 9.7 billion pounds, lifted by “exceptional” growth at its global banking and markets securities unit.
Swiss Reinsurance Co., the world’s second-biggest reinsurer, surged 12 percent to 36.76 Swiss francs after Bank of America Corp. raised its recommendation for the shares to “buy” from “neutral.”
3i Group Plc jumped 17 percent to 396 pence. The U.K.’s largest publicly traded private-equity firm said it plans to raise about 700 million pounds in a rights offering after debt climbed and the value of its investments slumped.
Taylor Wimpey
Taylor Wimpey Plc surged 11 percent to 40.75 pence after the U.K. house builder that last week completed a financial rescue deal also announced plans to raise capital. The company said it will raise 510 million pounds selling shares to pay down debt and slash interest costs.
Luxottica Group SpA jumped 12 percent to 16.18 euros as the world’s biggest eyewear maker posted a 23 percent drop in first- quarter net income to 80.4 million euros ($108 million), beating analysts’ estimates. The company also said sales were improving.
U.S. employers probably cut fewer jobs in April as signs emerged that the worst of the recession had passed, economists said before a government report today.
Payrolls fell by 600,000 after a 663,000 drop in March, according to the median estimate of 70 economists in a Bloomberg News survey. The unemployment rate still jumped to a 25-year high of 8.9 percent last month, the survey showed, and probably won’t start retreating until an economic recovery is secured.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
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