Stocks rally as hopes rise over bond insurers

Stocks gained in Europe and Asia, led by financial companies, on speculation bond insurers will maintain their credit ratings, limiting further losses related to subprime-mortgage defaults. US index futures advanced.

UBS AG and BNP Paribas SA led banks higher in Europe, while Millea Holdings Inc, Japan's biggest insurer, and Commonwealth Bank of Australia climbed in Asia. Royal Bank of Scotland Group Plc gained on expectations Qatar Investment Authority may buy a stake, while Alliance & Leicester Plc jumped on speculation it may get a bid from Lloyds TSB Group Plc. Genentech Inc rose 10 percent in Frankfurt after winning approval to market its Avastin treatment for breast cancer.

The MSCI World Index added 0.8 percent to 1,460.6 as of 10:54 am, while futures on the Standard & Poor's 500 Index increased 0.3 percent. The MSCI World Financials Index jumped 1.6 percent, the most in almost two weeks, as investors speculated Ambac Financial Group Inc may get new capital.

"We're making our way toward a rescue plan for Ambac," said Salah Seddik, who helps oversee $5.9 billion at Richelieu Finance in Paris. "This is reassuring and good news for financial stocks. It means that in terms of writedowns, the worst is behind us."

Speculation that companies in the bond-insurance industry may not be able to maintain the AAA credit ratings they rely on to insure about $2.4 trillion in securities has contributed to an 8.1 percent decline in the MSCI World this year.

Europe's Dow Jones Stoxx 600 Index advanced 1.6 percent, with all 18 national markets gaining. Germany's DAX added 1.4 percent, while France's CAC 40 rose 1.8 percent. The United Kingdom's FTSE 100 jumped 1.6 percent.

The MSCI Asia Pacific Index climbed 1.4 percent. Japan's Nikkei 225 Stock Average increased 3.1 percent to 13,914.57, the highest close since Jan 15.

UBS, Millea

UBS, Europe's largest bank by assets, climbed 3.4 percent to 36.88 Swiss francs. BNP Paribas, France's biggest bank, advanced 3.9 percent to 63.58 euros. Deutsche Bank AG, Germany's largest lender, gained 3 percent to 76.59 euros.

Millea rallied 8.9 percent to 4,030 yen, the most since Oct 2. Commonwealth Bank, Australia's biggest mortgage lender, rose 4.9 percent to A$44.67.

Ambac may get $3 billion in new capital as part of a rescue agreement with banks, according to a person with knowledge of the discussions. Ambac spokeswoman Vandana Sharma declined to comment specifically on the discussions.

Royal Bank of Scotland rose 7.1 percent to 405 pence. The Qatari government is considering an investment in the UK's second-largest bank, the Sunday Telegraph Business reported, citing unidentified people with knowledge of the matter.

Alliance & Leicester gained 7.3 percent to 547 pence, and Bradford & Bingley Plc jumped 9.3 percent to 206 pence.

Lloyds TSB, the biggest UK provider of personal loans, is in the "early stages" of assessing approaches to smaller rivals Alliance & Leicester and Bradford & Bingley, the Sunday Telegraph reported, citing unidentified people close to the bank.

RBS spokeswoman Carolyn McAdam, Lloyds TSB spokeswoman Kirsty Clay and Alliance & Leicester spokesman Stuart Dawkins declined to comment.

Agencies

(China Daily 02/26/2008 page16)