Stocks Rise as Corporate Profit Outlook Improves; Pound Falls

By Justin Carrigan

March 19 (Bloomberg) -- Stocks rose in Europe and Asia, led by banks, as an improving outlook for the global economy lifted expectations for corporate earnings. The pound fell and industrial metals advanced.

The Stoxx Europe 600 Index advanced 0.5 percent at 10:16 a.m. in London as three shares gained for every two that fell. The pound weakened against all 16 of its most-traded peers tracked by Bloomberg, and the Swiss franc strengthened versus 15. Copper rose 0.3 percent, and oil dropped below $82 a barrel. Greek bonds fell, with the yield on the government’s benchmark two-year note rising 15 basis points.

Investors became more optimistic on the economy and corporate earnings after Lloyds Banking Group Plc, the U.K. mortgage lender bailed out by the government, said today it expects to return to profit this year. Gains for stocks were limited as divisions grew with the European Union over how to help Greece tackle its financial crisis.

“We have to see financial shares rise for the stock market to extend gains,” said Pierre-Alexis Dumont, a fund manager at OFI Asset Management in Paris, which oversees $27 billion in assets. The Lloyds news is “evidently positive. This means the health of U.K. banks can recover more quickly than expected.”

The MSCI World Index of 23 developed nations’ stocks rose 0.2 percent. Lloyds surged 7.8 percent in London, the biggest gain since October. Royal Bank of Scotland Group Plc, the largest government-owned U.K. bank, climbed 5.6 percent.

Futures Gain

Futures on the S&P 500 slipped 0.1 percent after the benchmark gauge for U.S. equities closed little changed yesterday near its highest level since September 2008. Government reports yesterday showed initial unemployment claims dropped by 5,000 last week, and the consumer price index was unchanged, adding to evidence the economy is recovering without stoking inflation.

The MSCI Asia Pacific Index rallied 0.6 percent as exporters gained. Sony Corp. climbed 2.6 percent in Tokyo. Advantech Co., an industrial-computer maker that gets a third of its sales in North America, jumped 4.6 percent in Taipei. Kia Motors Corp., South Korea’s second-largest automaker, gained 4.2 percent in Seoul after saying it will boost production capacity in Europe.

The MSCI Emerging Markets Index rose 0.1 percent, headed for its sixth weekly advance, the longest rally since May. Emerging-market equity funds received the biggest inflows in two months, according to EPFR Global data for the week ending March 17. South Africa’s rand weakened 0.4 percent against the dollar.

Pound’s Drop

The pound fell 0.7 percent against the dollar and 0.6 percent versus the euro after Bank of England policy maker Andrew Sentance said Britain may return to recession, adding to speculation the central bank will keep its benchmark interest rate at a record low.

The euro dropped 0.1 percent against the dollar, its third straight decline. Greek Prime Minister George Papandreou said yesterday he may turn to the International Monetary Fund to overcome the debt crisis unless EU leaders agree to set up a lending facility at a March 25-26 summit. German officials said the IMF is the best option, while French President Nicolas Sarkozy and European Central Bank President Jean-Claude Trichet said IMF aid would show the EU can’t solve its own crises.

Crude oil for April delivery fell 0.6 percent to $81.75 a barrel on the New York Mercantile Exchange at 9:20 a.m. London time, declining for a second day.

To contact the reporters on this story: Justin Carrigan at jcarrigan@bloomberg.net