Stocks in Europe and Asia rose as BP Plc's earnings topped analysts' estimates and the MSCI World Index traded near the cheapest relative to earnings since at least 1995. U.S. index futures climbed.
BP rallied 5.3 percent after Europe's second-biggest oil company said profit rose 83 percent in the third quarter. Air France-KLM Group, Europe's biggest airline, and Ryanair Holdings Plc gained after Citigroup Inc. recommended the stocks. Volkswagen AG surged as much as 93 percent to become the world's biggest company by market value.
“Good earnings reports are giving a bit of cheer to the market and allowing investors to look at the fundamentals,'' said Vincent Juvyns, a strategist at ING Investment Management in Brussels, which oversees $537 billion. “Valuations are interesting.''
The MSCI World Index added 1.3 percent to 844.5 at 10:17 a.m. in London, snapping a two-day, 8.4 percent drop. Europe's Dow Jones Stoxx 600 Index advanced 2.1 percent. Standard & Poor's 500 Index futures rallied 4.3 percent with Alcoa Inc. gaining in Germany after stock traded at the lowest price-to- earnings ratio on record.
Toyota Motor Corp. climbed 7.8 percent in Tokyo and Hynix Semiconductor Inc. soared 15 percent in Seoul, helping to lift the MSCI Asia Pacific Index 3.6 percent.
More than $12 trillion was erased from the market value of equities this month, accounting for about one-third of the total value wiped off stocks this year, as almost $680 billion of writedowns and losses by banks triggered a freeze in credit markets.
The MSCI World is trading at 10.5 times earnings of the companies in the index, near its lowest since at least 1995 when Bloomberg started following the data.
The index of companies from 23 developed countries has fallen 29 percent in October, its worst month on record, as central banks and governments worldwide bailed out banks and cut interest rates to stabilize the banking system and try to avert recession.
Europe's Stoxx 600 is down 23 percent in October, headed for its biggest decline since the October 1987 crash. The measure closed yesterday valued at 7.9 times profit, the lowest since at least January 2002. The S&P 500 for U.S. equities trades at 18.9 times profit.
BP climbed 5.3 percent to 461 pence. Profit rose 83 percent to $8.05 billion in the third quarter as record crude and higher natural-gas prices outweighed production setbacks in Azerbaijan and the Gulf of Mexico.
Excluding one-time items and gains or losses from inventories, profit was expected to climb 62 percent to $6.82 billion, according to the median estimate of 10 analysts surveyed by Bloomberg News.
Earnings for Stoxx 600 companies will decline 5.2 percent in 2008, down from 11 percent growth predicted the start of the year, according to estimates compiled by Bloomberg. Profits for S&P 500 companies will drop 6.8 percent, down from 15 percent growth expected at the beginning of the year.
Aviva Plc climbed 14 percent to 279.75 pence. The U.K.'s biggest insurer by assets said its capital reserves are ''strong,'' as it reported a 12 percent increase in life and pension sales in the first nine months of the year, helped by gains in the U.S.
Air France, Europe's largest airline, added 5.2 percent to 10.94 euros, and Ryanair, the region's biggest discount carrier, added 2.8 percent to 2.56 euros. The stocks were raised to ''buy'' from ''hold'' at Citigroup, which cited ''record low'' valuations. The Stoxx 600 travel index is trading at 8.3 times earnings, the lowest since at least 2004 when Bloomberg began tracking the data.
ARM Holdings Inc. gained 12 percent to 90 pence after the U.K. designer of semiconductors used in Apple Inc.'s iPhone said third-quarter profit jumped 38 percent on record sales.
Volkswagen soared 59 percent to 830 euros, after touching 1,005.01 euros earlier. The automaker's shares rallied after Porsche SE announced plans to raise its stake in the German carmaker to 75 percent, triggering demand from short-sellers. Porsche said it will increase its holding from 42.6 percent, prompting some short-sellers to buy from a shrinking pool of stock to end their bets.
Alcoa added 4.6 percent to $9.46 in German trading. A 75 percent drop this year left the stock valued at 4.86 times earnings as of yesterday, the cheapest on record.
Toyota, Japan's largest automaker, rose 7.8 percent to 3,170 yen, halting a four-day, 22 percent drop. Hynix, the world's second-biggest memory chip-maker, soared 15 percent to 9,330 won, rebounding from a five-day, 47 percent slump.
British Sky Broadcasting Group Plc gained 2.3 percent to 360.25 pence. The U.K.'s biggest pay-television provider was upgraded to “buy” from “hold” at Citigroup.
SAP AG fell 2.2 percent to 24.025 euros. The world's biggest maker of business-management software withdrew its 2008 sales forecast and lowered its profit-margin target, citing the economic slump. Adjusted operating margin will be about 28 percent, the company said. SAP previously forecast the operating margin would be between 28.5 percent and 29 percent.
Dexia SA sank 5.6 percent to 3.71 euros. The world's biggest lender to local governments said its Slovakia unit was hit by “excessive” currency exposure, resulting in a negative impact at the parent level of 82 million euros ($103 million).
