Asian Stocks Rise After U.S., Europe Shares Jump on Debt Pledge; Rio Gains

By Shani Raja - Oct 11, 2011 8:42 AM GMT+0800


Asian stocks rose, driving a regional benchmark index higher for the fourth straight day, after U.S. and European shares jumped in response to a pledge by German and French leaders to stem Europe’s debt crisis.

Rio Tinto Group, the world’s second-largest mining company by sales, rose 1.6 percent in Sydney. Korea Zinc Co. surged 6.5 percent in Seoul. Mitsubishi Corp., which gets 43 percent of its revenue from commodities trading, gained 2.9 percent in Tokyo, while Sony Corp., Japan’s largest exporter of consumer electronics, jumped 5.2 percent. Japanese markets resumed trading today after a public holiday yesterday.

The MSCI Asia Pacific Index gained 1.1 percent to 114.94 as of 9:25 a.m. in Tokyo, led by exporters and mining companies as commodity prices advanced after German Chancellor Angela Merkel and French President Nicholas Sarkozy pledged at the weekend to deliver a plan to recapitalize the Europe’s banks and address Greece’s sovereign-debt crisis by Nov. 3. More than four stocks rose for each that fell on the gauge.

“There is hope that if a comprehensive European bank package is announced, the damage on the real economy will be less than currently expected,” said Belinda Allen, a senior investment analyst at Colonial First State Global Asset Management in Sydney, which oversees about $145 billion. “That would be better news for global growth and commodity demand.”
Estimated Earnings

The MSCI Asia Pacific Index dropped 17 percent this year through yesterday, compared with a 5 percent loss for the S&P 500 and a 14 percent decline for the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 11.6 times estimated earnings on average, compared with 12 times for the S&P 500 and 10 times for the Stoxx 600.

Australia’s S&P/ASX 200 Index gained 0.4 percent today, South Korea’s Kospi Index climbed 2.2 percent and Japan’s Nikkei 225 Stock Average advanced 2 percent.

Futures on the Standard & Poor’s 500 Index slid 0.1 percent today. In New York yesterday, the gauge rose 3.4 percent, its biggest rally since August, with all 10 industry groups advancing. The S&P 500 last week rebounded from the threshold of a bear market on optimism Europe will tame its debt crisis and after U.S. economic data improved.

The Stoxx Europe 600 Index completed its biggest four-day gain since 2008 yesterday.

“Commodity prices and stocks fell sharply over the last few months on worries Europe would blow up, causing a collapse in global growth,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “The pledges from Merkel and Sarkozy help provide confidence that this won’t happen.”

Copper futures for December delivery climbed 2.9 percent on the Comex in New York yesterday and gold futures rose 2.1 percent, while crude oil for November delivery gained 2.9 percent. The London Metal Exchange Index of prices for six industrial metals, including copper and aluminum, added 1.7 percent for its third straight daily gain.