Europe Stocks Rise on Rate Cut Speculation


European stocks and U.S. index futures rose as Australia's bigger-than-expected interest-rate cut spurred speculation central banks around the world will reduce borrowing costs to unlock frozen credit markets.

Total SA climbed 4.7 percent as Australia's one percentage- point rate cut helped send crude oil higher for the first time in five days. Volkswagen AG soared 38 percent as speculators bought back shares to close out so-called short positions. Europe's Dow Jones Stoxx 600 Index dropped as much as 1.6 percent earlier on concern financial companies need more capital, then rallied after Barclays Plc said it hasn't requested an investment from the U.K. government and Deutsche Bank AG said it's not raising capital.

The Stoxx 600
added 0.4 percent to 242.45 at 12:33 p.m. in London. Futures on the Standard & Poor's 500 Index increased 0.7 percent. The MSCI Emerging Markets Index climbed 0.2 percent, while the MSCI Asia Pacific Index fell 1.2 percent.

Europe's Stoxx 600 tumbled the most since 1987 yesterday as bank bailouts spread and falling commodities dragged down raw- materials producers. The Dow Jones Industrial Average dropped as much as 800 points in New York, then recouped more than half its losses in the final 75 minutes of trading on speculation the Federal Reserve will lower rates.

U.K. stocks
advanced, rebounding from the biggest slump in more than twenty years yesterday, led by BP Plc and Royal Dutch Shell Plc as the price of crude oil rallied. The benchmark FTSE 100 index gained 78.45, or 1.71 percent, to 4,667.58 at 1:15 p.m. in London. The index plummeted the most since Oct. 20, 1987 yesterday, led by banks and mining companies on concern the credit crisis is deepening and as metals plunged.

Japan's stocks
slumped, sending the Nikkei 225 Stock Average to its lowest close in almost five years, as the seizure in credit markets curbed demand for the nation's exports and threatened to worsen the economic slowdown. The Nikkei Average fell 317.19, or 3 percent, to close at 10,155.90 in Tokyo after dipping below 10,000 for the first time since Dec. 10, 2003. The broader Topix index dropped 21.44, or 2.2 percent, to 977.61. More than four stocks retreated for each that gained on the gauge.

Australian stocks
rallied and bonds jumped after the nation's central bank cut benchmark interest rates by one percentage point, the biggest reduction since 1992. The S&P/ASX 200 Index added 1.7 percent to 4,618.70 at the close in Sydney, reversing an earlier loss of 0.5 percent immediately before the decision. The index has lost almost a third of its value this year amid a credit freeze triggered by the U.S. subprime mortgage crisis.

Indian stocks fell, with the benchmark Sensitive Index holding at a 2-year low on concern surging credit costs will deepen a global slowdown. The Bombay Stock Exchange's Sensitive Index, or Sensex, slid 0.9 percent to 11,695.24. The index held at its lowest since Sept. 12, 2006.

China's stocks
fell for a second day, led by raw-material and energy companies, extending a global rout after commodity prices slumped and Aluminum Corp. of China Ltd. forecast a profit decline. The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, declined 26.25, or 1.2 percent, to 2,102.45 at the close. It dropped 5.1 percent yesterday.


TradingEconomics.com, Bloomberg.com
10/7/2008 5:16:20 AM